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Begin Part 2 of 2
SUBSCRIBER QUESTIONS
Q: You mention money flow diving in one of your recent reports. What do you find to be the most accurate measure of this? I have seen so many with different values on the same day, I'm getting dizzy trying to come up with the best measure.
A: Money flow has many different heads to it. We look at Bloomberg money flow and TC2000 moneystream when determining money flow levels for our stocks as we have watched them over a long period of time and are comfortable with what they show. There is a caveat on all money flow readings, however: they work well for some stocks in some situations and then in other situations they just play follow the leader, i.e., following the stock up or down and not giving any real forecasting insight. Thus we quite often do not use just the raw data, e.g., that money flow is high. While the raw data does work for some stocks, you have to look at the history of the stock to see how well it has performed in the past.
What we focus on mostly with this type of indicator (as well as stochastics and MACD for example) is whether there is a divergence. A divergence is something that is not in sync with the rest of the chart. For example, if we see a stock that is in the handle of a cup with handle base (that is, moving lower on low volume) but money flow is racing up ahead, that is a positive divergence in that money flow is indicating there is a lot of buying going on and the price will usually follow. On the other hand we may see a stock moving up in price and show a negative divergence, i.e., money flow is moving down or tanking ahead of it. That may indicate that the move is running out of support. Go look at the price/volume action and other indicators to see if they agree or disagree with that proposition and thus confirm what you are seeing.
In sum, money flow is a secondary indicator that will either confirm or potentially call into question your analysis. Again, we really like to see those divergences between money flow and price as those can act as an early warning signal for potential plays.
THE PLAYS:
Best Plays:
1) ENDP: Nice cup w/handle.
2) BL: Still a great pattern.
3) BLC: Getting close.
4) ECL: Nice volume spike on a doji.
5) FNFG: Very tight pattern.
6) ZMH: Nice, low volume handle.
7) Watchlist: ATH; HAR
NEW PLAYS
OSI (Outback Steakhouse--$38.69; +0.29; optionable): Australian wanna' be restaurant
http://biz/yahoo.com/p/o/osi.html
STATUS: Test breakout. OSI broke out of a long base in late 2001, and then formed an ascending wedge up the 50 day MVA from February to May. Thursday it broke out on very strong volume and has tested that move the past three sessions. Today the stock rose on rising, average volume in an otherwise crappy market. It is showing excellent price/volume action, and relative strength has broken out and remains very strong as it tests the move. We are looking at picking this one up here and letting it work for us.
Volume: 452.4K Avg Volume: 479.545K
BUY POINT: $39.05 Volume=720K Target=$46.94 Stop=$36.32
POSITION: OSI KG - Nov. $35 call, delta 77 and/or stock
http://www.investmenthouse.com/ct/osi.html
ENDP (Endo Pharmaceuticals--$12.70; +0.18; optionable): Drug manufacturer
http://biz.yahoo.com/p/e/endp.html
STATUS: Cup with handle. The pattern dates back to mid-January, and ENDP has pulled back into the handle as it approached its left-side high at 13.31. A solid pattern, with a nice uptrend before formation, and good price/volume action showing overall accumulation. The handle is looking good as well, with volume tapering off to low levels as the the stock pulls back toward the support of its 18 day MVA (12.28). Today ENDP pushed back up slightly, and we are looking for a move over the handle high of 13.05. Excellent relative strength that is also ready to breakout. Target: 15.80
BUY POINT: 13.15 on volume of 315k (avg. 210k; today down to 128k). Stop: 12.23 (7%)
POSITION: Stock and/or October $10c to buy (IUK JB - 60 OI, .78 delta)
CONTINUING PLAYS
Upside:
BL (Blair Corp.--$22.80; -0.13; no options): Play Date: 05/21/2002
http://biz/yahoo.com/p/b/bl.html
STATUS: Cup w/handle. Still looking good in the 5-month base. It continued its string of dojis the last two sessions, with volume up Tuesday but back down today. Excellent accumulation in the base with money flow leading the way up and relative strength ready to breakout as well.
Volume: 8.4K Avg Volume: 13.5K
BUY POINT $23.85 Volume=45K Target=$27.5 Stop=$22
POSITION: Stock (no option chain)
http://www.investmenthouse.com/ct/bl.html
BLC (Belo-- $24.05; +0.03; optionable): Play Date: 05/25/2002
http://biz/yahoo.com/p/b/blc.html
STATUS: Flat base. Right at the breakout point of its flat base for the past two sessions on very tight doji's, today's almost a perfect doji. Volume dropped well off the pace, coming in below average. After two strong moves up Thursday and Friday, this action is a bit indecisive at the breakout point. BLC may want to come back to the 18 day MVA at 23.45 before trying the breakout. In any event, we still like the pattern a lot from this stock that broke out in February and is not consolidating that move.
Volume: 162.3K Avg Volume: 278.409K
BUY POINT: $24.25 Volume=342K Target=$30 Stop=$22.55
POSITION: Stock and/or BLC JD - Oct. 20c (delta 91)
http://www.investmenthouse.com/ct/blc.html
DVN (Devon Energy-- $50.20; -0.35; optionable): Play Date: 05/25/2002
http://biz/yahoo.com/p/d/dvn.html
STATUS: Wedge. Still in the nice wedge in this interim consolidation pattern following DVN's move up off of the bottom of its base. As noted over the weekend, DVN is not necessarily one we are looking to own long term, but the wedge can give us a strong trade that can turn into something bigger. We are looking primarily at options with this one as our first target is the next resistance at 55. After that, however, it could move up to 61 if it gets a good volume breakout over 55.
Volume: 605.5K Avg Volume: 1.001M
BUY POINT: $50.95 Volume=1.4M Target=$61 Stop=$47.38
POSITION: DVN JI - Oct. 45c (71 delta) to buy or stock.
http://www.investmenthouse.com/ct/dvn.html
ECL (Ecolab--$47.05; +0.10; optionable): Play Date: 05/23/2002
http://biz/yahoo.com/p/e/ecl.html
STATUS: Cup w/handle. About as low tech as you can get, but a very nice 3-month base. After last Thursday's promising move toward the breakout, ECL has pulled back, but after a low volume drop the stock held today with a 'shooting star' doji on very strong volume. Off of this pattern we could get the move. The base has shown strong money flow and good accumulation.
Volume: 586.7K Avg Volume: 336K
BUY POINT $47.80 Volume=500K Target=$57.36 Stop=$44.45
POSITION: Stock and/or ECL JI - Oct. $45c (delta 69)
http://www.investmenthouse.com/ct/ecl.html
FNFG (First Niagara Financial--$25.44; +0.01; no options): Play Date: 05/22/2002
http://biz/yahoo.com/p/f/fnfg.html
STATUS: Flag. Still extending in the flat base. It looks very close to making the breakout move and throwing up the next flag pole. Remember, the key is catching it on the move early as the run up is usually ballistic.
Volume: 24.8K Avg Volume: 41.363K
BUY POINT $25.95 Volume=50K Target=$31 Stop=$24.13
POSITION: Stock (no options)
http://www.investmenthouse.com/ct/fnfg.html
IMN (Imation-- $29.24; -1.17; optionable): Play Date: 05/25/2002
http://biz/yahoo.com/p/i/imn.html
STATUS: Wedge. Tanked Wednesday toward the 50 day MVA (28.75) on continued below average volume. The move disrupted a nice wedge pattern that looked to be in its later stages. We wanted it to hold at the 18 day MVA just above 30 for the breakout, but now we have to let the pattern try to form back up. It is still not in bad shape; these dips late in the pattern can act as a final shakeout. Still solid, so we will keep an eye on the breakout point.
Volume: 130.8K Avg Volume: 123.045K
BUY POINT: $31.58 Volume=200K Target=$38 Stop=$28.25
POSITION: Stock and/or IMN JE - Oct. 25c (delta 82) to buy.
http://www.investmenthouse.com/ct/imn.html
KLAC (KLA Tencor--$53.00; -2.01; no options): Play Date: 05/25/2002
http://biz/yahoo.com/p/k/klac.html
STATUS: Did not get much of a bounce. We were looking at an aggressive trading play on KLAC after its gap down and doji Friday after the chip equipment downgrade. However, it only made a small, low volume move, and today gapped back and closed just over the 200 day MVA (52.92). We will see if it can hold and set up something.
http://www.investmenthouse.com/ct/klac.html
MERQ (Mercury Interactive--Mercury Interactive--$33.26; -0.57; optionable): Play Date: 05/28/2002
http://biz/yahoo.com/p/m/merq.html
STATUS: Rolling. Still holding above the 200 day MVA (32.75), selling back slightly on lower, below average volume. It is still holding up very well, and with a relief bounce coming in the near term, MERQ is still in great position to make a roll up to 39 to 40 as it has done for the past 7 weeks. Given it is a $5 move we are looking primarily at option positions. This is an aggressive play, but we like the action.
Volume: 3.106M Avg Volume: 4.337M
BUY POINT: $35.35 Volume=6.7M Target=$39 Stop=$32.88
POSITION: RQB JF - Oct. 30 call, 71 delta
http://www.investmenthouse.com/ct/merq.html
OMX (Officemax--$7.17; -0.22; no options): Play Date: 05/28/2002
http://biz/yahoo.com/p/o/omx.html
STATUS: 18 day MVA bounce. Today was not the day for bounces, and OMX sold back to close right at the 18 day MVA after gapping slightly higher. Volume was very low on the move as it tests the 18 day MVA for the second time after breaking out in February. Again we are looking at catching the next two bounces up off of the 18 day MVA for a nice return.
Volume: 524.3K Avg Volume: 1.273M
BUY POINT: $7.65 Volume=1.9M Target=$11 Stop=$6.60
POSITION: Stock (no option chain).
http://www.investmenthouse.com/ct/omx.html
XRAY (Dentsply-- $39.48; -0.26; optionable): Play Date: 05/25/2002
http://biz/yahoo.com/p/x/xray.html
STATUS: Ascending wedge. Tried to make the breakout Tuesday, but was tossed back with the market. Volume was good that session, but we always have to be wary of the reversals on high volume when a stock attempts a breakout. Wednesday it performed just fine, gapping lower but recovering for a fractional loss on some lower, slightly below average volume. It is still very much in the pattern, and we still like the play a lot. Again, we like these wedges that follow breakouts from patterns such as cup with handles.
Volume: 297.1K Avg Volume: 313.681K
BUY POINT: $40.35 Volume=465K Target=$48.25 Stop=$37.53
POSITION: Stock and/or XEQ JG - Oct. 35c (delta 83)
http://www.investmenthouse.com/ct/xray.html
ZMH (Zimmer Holdings-- $35.24; -0.18; optionable): Play Date: 05/25/2002
http://biz/yahoo.com/p/z/zmh.html
STATUS: Cup w/handle. Still pulling back in the handle of the 12-week cup with handle in its first real base since it came to market in August 2001. It consistently tests 34.85 on its intraday lows but then recovers to close above the 18 day MVA (35.23). Volume was slightly higher but still well below average; nothing to worry about in this handle. We really like the way the pattern is shaping up; it is one of those stocks that has held its own and kept its pattern when the market is selling.
Volume: 318.9K Avg Volume: 663.863K
BUY POINT: $36.95 Volume=1.1M Target=$45 Stop=$34.36
POSITION: Stock and/or ZMH LF - Sept. 30c (delta 87)
http://www.investmenthouse.com/ct/zmh.html
Downside
HOV (Hovnanian Enterprises-- $29.45; +1.95; optionable): Play Date: 05/28/2002
http://biz/yahoo.com/p/h/hov.html
STATUS: Put. It was looking weak with the breakdown below the 50 day MVA and the test, but good earnings gapped it up over the 50 day MVA (28) today on some massive volume. It did test that level on the low, but we will have to just let this one go most likely. We will watch how it trades the next few sessions to see if it hits our buy point but we will let it show the move given the good earnings. This is one area that could be starting to top (housing construction).
Volume: 874.1K Avg Volume: 329.727K
BUY POINT: $26.45 Volume=525K Target=$22 Stop=$29.25
POSITION: HOV TG - Aug. 35 put, -70 delta
http://www.investmenthouse.com/ct/hov.html
IWM (Ishares Russell 2000--$96.87; -1.25; optionable): Play Date: 05/21/2002
http://biz/yahoo.com/p/i/iwm.html
STATUS: Put. Fell through the recent lows, hitting the buy point Tuesday and recovering a bit, but today continuing down. Volume was lighter, but we are looking for a continued move down toward the target of 94.
Volume: 804.2K Avg Volume: 950K
BUY POINT Riding current positions taken at $97.85. Target=$94 Stop=$101
POSITION: IWM TA - Aug. $105p
http://www.investmenthouse.com/ct/iwm.html
MMC (March & McLennan--$102.25; +0.70; optionable): Play Date: 05/25/2002
http://biz/yahoo.com/p/m/mmc.html
STATUS: Put. MMC suffered a nasty drop in late April from 112 to 98, undercutting the 200 day MVA (103) on the way down. It recovered, moving to 104 where it appears to have double topped, climbing up to that point on very low volume. We got a drop back through the buy point Tuesday, and although selling volume was up, it was still well below average. Today MMC reached back up to tap the 200 day, but pulled off of that level to close, and we are looking for a renewed drop after the weak test.
Volume: 535K Avg Volume: 889.3K
BUY POINT: New positions can be taken at $101.20 Volume=1M Target=$97.75 Stop=$105
POSITION: Puts: MMC SB - July 110p (delta -76)
http://www.investmenthouse.com/ct/mmc.html
OSIP (OSI Pharmaceuticals--$31.35; -0.49; optionable): Play Date: 05/25/2002
http://biz/yahoo.com/p/o/osip.html
STATUS: Put. OSIP has been moving in a down trendline since November. For the past two months it has been using the 50 day MVA as resistance as well. It hit into the 50 day last week and has retreated a bit, Tuesday hitting the buy point although volume was much weaker than we were looking for. Today it dipped a bit more, but on very light volume and is still holding over the 18 day MVA (31.15). We can still look at positions on a renewed drop.
Volume: 268K Avg Volume: 607K
BUY POINT: New positions at $30.75 Volume=925K Target=$27.25 Stop=$34.25
POSITION: (GHU SH - July 40p (-80 delta))
http://www.investmenthouse.com/ct/osip.html
UVN (Univision Communications--$39.88; +0.13; optionable): Play Date: 05/04/2002
http://biz/yahoo.com/p/u/uvn.html
STATUS: Kiss goodbye. Hit the put buy point Tuesday but did not drop much, and volume was light. Today volume kicked up to a massive 3m (avg. 1m), and UVN showed a doji just under the thick ice of its down trendline and 50 day MVA (40.93), with the 10 day (40.07) acting as recent resistance. No news accompanying the volume, and we continue to look for UVN to make a strong drop.
Volume: 3m Avg Volume: 1.01M
BUY POINT $39.40 Volume=1.5M Target=$35.5 Stop=$42
POSITION: UVN RI - June$45p
http://www.investmenthouse.com/ct/uvn.html
Continuing plays:
We have put all plays in a summary table that contains the date the stock was put on the report (so you can go back and check out the details of the play) and the other pertinent information. This provides more information than the watchlist summaries and still contains comments when appropriate. VIEW THIS IN COURIER NEW, 12 FOR BEST RESULTS. You can also easily print the table from the website (www.investmenthouse.com) from the 'current reports' section. If you just want to print the table you can cut and paste it to a word document setting the font to Courier New size 12. Just left click on the beginning of the table and drag to the table end. After selecting, right click and select 'copy.' Paste into your word processor. Select it all and choose Courier New, font size 12.
Stock Date Play Close +/- Pivot Tgt Vol AvgV Stop
ABF 05/11 BO 22.46 -0.19 22.23 25.75 509K 646K 20.67
A nice test of the 18 day MVA still in progress.
AMHC 05/22 A Wedge 26.84 -0.02 28.05 36 255K 221K 26.09
Still holding at the 50 day MVA, showing a doji on higher vol. Good.
ATH 05/16 Test 50 67.8 +1.3 68.5 75 1.1M 1.2M 63
Moving up off 50 day MVA on rising volume. Like it.
BGG 05/11 Put 41.01 -0.69 39.4 35 128K 134K 42
BRO 04/22 cup hdl 34.8 +0.5 35.63 42.75 137K 327K 32.95
Looks as if it is finding its feet above the 50 day MVA.
BYBI 05/23 BO 10.99 +0.86 9.7 12.75 90K 43K 9.02
Starting back up after Tuesday selling.
CACI 05/08 Put 29.58 +0.03 31 27.5 224K 715K 32.50
Tried to rally, but no volume.
CCMP 05/20 Put 46.7 -2.3 51 45 1M 1.4M 53.80
Falling again on rising volume. Nice.
CDI 05/11 Pennant 27.85 +0.37 30 34.75 52K 56K 27.90
Found support at the 50 day MVA on rising volume.
CERN 05/20 A Wedge 52.26 +1.41 56.1 60 549K 450K 53
Bouncing at the 200 day MVA on strong volume.
CTX 05/11 Put 53.5 -0.75 53.5 49 821K 1.2M 56
Not performing well even on the TOL earnings. That is good.
ELBO 05/11 Put 27.53 +1.34 30.2 26 712K 418K 32.50
Hit the target Tuesday and bounced today. Worked perfectly.
FRX 05/16 Put 75.62 +0.39 75.9 71 871K 1.3M 78.50
A doji that tested the 200 day MVA on the high. Looks ready again.
FSS 05/22 DB hdl 25.75 -0.02 25.8 31 167K 189K 23.99
Low volume testing of the move.
GMRK 04/20 Test 50 42.29 +0.39 44.63 55 56K 64K 41.75
Doji above the 50 day MVA.
GNSS 05/15 BO 23.36 -1.72 28.1 34 3.5M 3.7M 26.90
NVLS news destroyed the chips of all types.
GNTA 05/04 Put 9.79 -0.21 11.75 9 813K 1.4M 12
GRTS 05/16 Test 50 31.8 +0.3 34.9 44.5 360K 151K 32.46
HAR 05/13 Test 18 56.4 +0.1 58.55 64 150K 207K 54.45
Now testing the 18 day MVA.
HGR 05/20 Test 50 14.25 +0.57 12.6 19 142K 102K 11.72
Making a strong move on rising, above average volume. Nice
HI 05/20 Put 52.8 -0.05 53.45 48.5 2.2M 2.9M 56
Being stubborn at 52. Holding for now.
HLT 05/06 Put 14.04 +0.06 14.3 12 3.3M 2.2M 15.80
Another doji at 14 on strong volume. Being stubborn.
HSIC 05/15 BO 49.54 +0.09 49.4 56.9 311K 324K 46.50
HZO 05/04 A Wedge 13 -0.55 14.5 17.4 52K 79K 13.75
Pattern breaking down.
IMDC 05/20 Put 32.13 -0.07 29.9 26 105K 203K 32
IRM 05/01 A Wedge 31.17 -0.64 32.6 39.25 90K 189K 30.75
Breaking down below the 50 day MVA.
ITN 05/13 DB hdl 13.2 +0.18 13 16.5 112K 109K 11.75
IWM 05/21 Put 96.87 -1.25 97.85 94 976K 0 101
Falling nicely.
KROL 06/06 BO 22.1 +1.3 20.2 24 656K 266K 19.50
Breaking to a new high on impressive volume.
LNCR 05/16 cup hdl 29.56 +0.06 32.7 39 509K 968K 30.41
NFB 04/13 BO 39.25 -0.03 36.55 43.5 444K 638K 37
Having trouble holding the 18 day MVA.
PCLE 05/06 cup hdl 11 +0.34 10.27 13 1M 511K 9.40
Starting back up on strong volume after that test on Tuesday.
RAH 05/08 Test 18 28.8 -0.09 29.1 35 63K 94K 27.06
Tight doji right on the 18 day MVA. Very tight consolidation.
SGR 05/11 A Wedge 34.38 -0.87 34.32 40.75 254K 601K 31.92
Testing the 18 day MVA once again. Still in the pattern.
SLVN 03/27 cup hdl 27.23 -0.56 27.05 32 96K 301K 26.55
Keeps testing 26.80 on the low, but is so sluggish.
SOTR 05/02 cup hdl 25.64 +0.13 27.42 32.96 571K 1M 25.50
Still in the handle, but not the best one.
TEVA 05/15 BO 66.45 +0.15 62.1 67 577K 991K 60.50
Nice hold at 66, but volume is very light. May still test 65.
UVN 05/04 Put 39.88 +0.13 39.95 35.5 3M 1M 42
Being very stubborn at 40, showing a doji on HUGE volume.
VMC 05/11 Put 46.7 +0.07 45.9 41.5 133K 170K 47.50
Doji right above the 200 day MVA.
WFC 03/28 A Wedge 52.44 -0.27 50.85 60.52 3M 3.8M 50
Still riding up the 18 day MVA. Not bad at all.
WL 04/25 Put 62.62 +0.17 65.6 62 60K 75K 67
Need to go ahead and take profits.
WYE 05/23 Put 55.81 -1.04 57.5 54 2.8M 3.8M 59.50
Falling again. Needs to get below 56 this time.
XTO 03/27 A Wedge 20.54 -0.21 20.98 25.98 478K 504K 19.75
Tested the 50 day MVA on the low but recovered. Still decent.
Good Investing!
Jon L. Johnson and your Technical Traders Report Team
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 in 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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