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ACS (Affiliated Computer Svc--$63.80; -1.20; optionable (ACS)): Software
http://biz.yahoo.com/p/a/acs.html
STATUS: Holding above the 10 day MVA (62.68) in a short trading range (test of breakout), pulling back on lower volume Friday (278,100; avg. 305,590). The stock continues to hold above the buy point of 62.76, so look for support at that price if it pulls back further. Hit a high of 65.75. Great money flow and high relative strength.
BUY POINT: On a move back up from 62.76 on rising volume.
POSITION: Stock and/or April $60 calls to buy (ACS DL).

ASD (American Standard Cos---$52.41; +0.11; optionable (ASD)): Materials and construction
http://biz.yahoo.com/p/a/asd.html
STATUS: Inched up on stronger volume (176,300; avg. 337,000) which still remains well below average, in its test of the breakout (reached a breakout high of 53.69). The stock still looks good, with high money flow and relative strength that continues to move higher, but it needs a strong dose of volume to break it out of the doldrums. Waiting for a rally.
BUY POINT: Over 53.69, on volume of 238,000 or better.
POSITION: Stock and/or April $50 calls to buy (ASD DJ).

SUB (Summit Bancorp--$42.79; -0.31; optionable (SUB)): Regional banks
http://biz.yahoo.com/p/s/sub.html
STATUS: In a three-day pullback and tested the 18 day MVA on the low of 42.40. Volume was lower (507,100; avg. 778,590) as the stock showed a doji. Like many stocks (especially in this sector), SUB is waiting for stronger volume in a good rally to break it over Wednesday's high of 44.61. The stock broke out of a pennant in early January, and has consolidated in this test of the breakout since. High money flow and relative strength.
BUY POINT: Over 44.61 on volume of 685,000 or better.
POSITION: Stock and/or April $40 calls to buy (SUB DH).

MER (Merrill Lynch & Co--$73.00; -3.00; optionable (MER, JMR)): Brokerage
http://biz.yahoo.com/p/m/mer.html
STATUS: Pulled back from the January breakout high (80), and below the buy point of 75.88, over the last eight days, and is currently testing a shorter term up trendline (tapped on the low of 72.55, and connecting December lows). The stock shot off that support Thursday for a 3-point move, but dropped back Friday on lower, below average volume (3.8 million; avg. 4.6 million). The trendline is reinforced by prices dotting that level since August, so look for a bounce back in a rally. Money flow holding at high levels
BUY POINT: Aggressive: On a bounce on strong volume. Safer: Over the intraday high of 76.20 on volume of 5 million or better.
POSITION: Aggressive: Stock and/or April $70 calls to buy (MER DN). Safer: Stock and/or April $75 calls to buy (JMR DO).

WEDGES, PENNANTS, and FLYING PLATEAUS (AND FLAGS): These are some of our favorite patterns as the moves can be explosive. In this market, however, we need to see the move on the breakout on strong volume.

Wedges:

New Play:

NATI (National Instruments Cp--$51.53; +0.65; optionable (SJQ)): Computer peripherals
http://biz.yahoo.com/p/n/nati.html
STATUS: In an ascending wedge with a pattern high of 53.13. Volume continued to fall below average (175,000; avg. 232,000) as the stock moved up the last two days. Can pull back to the 10 day MVA (50.80) before heading up for a breakout when the market rallies. High money flow and relative strength broke out higher the last two days.
BUY POINT: 53.26, on volume of 313,000 or better.
POSITION: Stock. March and June options have insufficient open interests (54 and 40 respectively). SJQ CJ or FJ

TD (Toronto Dominion Bank--$29.61; +0.14; optionable (TD)): Banking
http://biz.yahoo.com/p/t/td.html
STATUS: In a large ascending wedge that began in October. Pattern high is at 31.13. The stock moved laterally the last three days, Friday attempting a breakout move (up to a high of 30.33) on strong volume (128,100; avg. 94,454) but pulling back down to close. Look for a move back up in a rally from the support of the three-day consolidation. 10 day MVA is at 29.23. Relative strength moving higher.
BUY POINT: 31.13, on volume of 128,000 or better.
POSITION: Stock and/or April $30 calls to buy (TD DF).

PNC (Pnc Financial Svcs Grp--$74.40; +0.50; optionable (PNC)): Banking
http://biz.yahoo.com/p/p/pnc.html
STATUS: Another bank stock in an ascending wedge pattern, with a high at 75.81. Volume dropped further below average in the consolidation as this stock sets up for a breakout (843,000; avg. 1.1 million). Looking good, and has outstanding money flow.
BUY POINT: 75.94, on volume of 1.5 million or better. Remains a buy on the breakout up to 79.74.
POSITION: Stock and/or May $75 calls to buy (PNC EO).

Pennant:

New Play:

NCC (Nations City Corp--$28.14; -0.05; optionable (NCC)): Banking
http://biz.yahoo.com/p/n/ncc.html
STATUS: In a pennant (pattern high, 30.31) that is squeezing into its tail as volume drops further and well below average (453,100; avg. 1.15 million). Price has shown two consecutive dojis below its 18 day MVA (28.34), and is at apparent support (28, hit seven times in the pattern). Huge money flow.
BUY POINT: 30.44, on volume of 1.5 million or better.
POSITION: Stock and/or April $30 calls to buy (NCC DF).

Continued Plays:

SWBT (Southwest Bancorp of Tx--$43.25; +0.87; optionable (ZRQ)): Regional banks
http://biz.yahoo.com/p/s/swbt.html
STATUS: The pennant continues to look good; the stock moved up from a Thursday doji (that was below the 18 day MVA, 42.71) to show another Friday. Volume kicked up to 176,900 (avg. 235,500). Can move back down to support (18 day MVA or the 10 day MVA, 42.95) before heading back up to a breakout. Pattern high is 45.63. Good buying and excellent money flow.
BUY POINT: Breakout: 45.76, on volume of 318,000 or better.
POSITION: Breakout: Stock and/or May $45 calls to buy (ZRQ EI).

FAF (First American Corp--$31.08; +0.28; optionable (FAF)): Insurance
http://biz.yahoo.com/p/f/faf.html
STATUS: Another good-looking pennant. Bounced from the up trendline (connecting October and December lows) Thursday but slowed down Friday as volume pulled back even further below average (202,400; avg. 313,227). Holding at the 10 day MVA (30.64). Pattern high is 32.88. Continued high money flow.
BUY POINT: Breakout: 33.01, on volume of 423,000 or better. Remains a buy on the breakout up to 34.66.
POSITION: Breakout: Stock and/or April $30 calls to buy (FAF DF).

NEU (Neuberger Berman Inc--$81.95; -0.80; optionable (NEU)): Financial services
http://biz.yahoo.com/p/n/neu.html
STATUS: Made a move up from its 10 day MVA (80) on Thursday, pulling back slightly Friday on a bit of a rise in volume (221,100; avg. 274,000). The stock can pull back to 80.63, hit three times in the pennant, before heading back up toward a breakout.
Continues to look solid. Good money flow and decent buying.
BUY POINT: Aggressive: Up from 80.63 on rising volume. Breakout: 85.82, on volume of 370,000 or better.
POSITION: Aggressive: Stock. April $80 options have no open interests (NEU DP). Breakout: Stock and/or April $85 calls to buy (NEU DQ; please note that this option still has only 10 open interests).

CFBX (Community First Bankshrs--$19.25; +0.20; optionable (QSJ)): Regional Banks: Pacific
http://biz.yahoo.com/p/c/cfbx.html
STATUS: Dropped back down from Wednesday's breakout attempt to the 18 day MVA support (19.02), bouncing from there Friday on better volume (141,300; avg. 140,000). Reached a high of 19.44. This stock is waiting for a sustained rally to break it over the pattern high of 19.50. Plenty of financials are in the same situation, holding support on low volume. Great money flow and better, positive buying.
BUY POINT: 19.63, on volume of 189,000 or better. A buy on the breakout up to 20.61.
POSITION: Stock. May $17.50 (QSJ EW) and $20 (QSJ ED) calls have too few open interests (4 and 15, respectively).

EDS (Electronic Data Systems--$57.05; -0.75; optionable (EDS)): Software
http://biz.yahoo.com/p/e/eds.html
STATUS: Pulled back slightly on just higher volume (1.67 million; avg. 2 million), tapping near support on the low of 56.75 (10 day MVA, 56.53). The pennant (in the upper right side of the stock's lengthy base) still looks great. Look for a move back up from the support. Continued high money flow.
BUY POINT: Aggressive: Up from 56.53 on continued rising volume. Breakout: 60.13, on volume of 2.7 million or better.
POSITION: Aggressive: Stock and/or June $55 calls to buy (EDS EK). Breakout: Stock and/or June $60 calls to buy (EDS FL).

CSBI (Century South Banks Inc--$33.56; +0.50; no options):
http://biz.yahoo.com/p/c/csbi.html
STATUS: Another financial that continues its pennant consolidation on low volume, though the stock tried a move up Friday on stronger volume (59,500; avg. 82,363). Reached a high of 33.94 before pulling back down. We like the continued hold at support (10 and 18 day MVAs at 33.40 and 33.26, respectively), and look for a breakout in a market rally. Outstanding money flow and good buying.
BUY POINT: Breakout: 34.85, on volume of 111,000 or better. Remains a buy up to 36.59.
POSITION: Stock.

BASING/TRADING RANGES: There are many stocks, particularly financial stocks, forming solid patterns from which to break out. Because of the number, write-ups are as brief as possible.

New Plays:

ESRX (Express Scripts Inc--$95.13; +3.91; optionable (XTQ)): Health services
http://biz.yahoo.com/p/e/esrx.html
STATUS: The stock is in a double-bottom with handle pattern, and moved up from the base of the handle (18 day MVA, 92.83, tested on the low of 92.25) Friday on stronger volume (385,600; avg. 648,136). We like the lower volume as the pattern shakes out holders. Handle high is 100. Relative strength broke out higher on the move.
BUY POINT: Aggressive: Up from here on continued rising volume. Breakout: 100.13, on volume of 972,000 or better.
POSITION: Aggressive: Stock. March (XTQ CS)and May $95 (XTQ ES) options have too few open interests (11 and 1, respectively). Breakout: Stock and/or March $100 calls to buy (XTQ CT). May $100 options have 5 open interests (XTQ ET).

AZPN (Aspen Technology Inc--$38.00; -2.13; optionable (ZQP)): Software
http://biz.yahoo.com/p/a/azpn.html
STATUS: In the handle of its 22-week cup base, the stock pulling back on a heavier volume Friday to test near the 10 day MVA (37.20) on the low of 37.63 (438,100; avg. 355,000). Looking for the stock to hold the support level for a move back up in the handle (high at 41.25). Good buying and high money flow.
BUY POINT: 41.38, on volume of 533,000 or better. Remains a buy on the breakout up to 43.45.
POSITION: Stock and/or March $40 calls to buy (ZQP CH). May $40 calls (ZQP EH) have 26 open interests.

BBBY (Bed Bath & Beyond Inc--$26.56; +0.62; optionable (BHQ)): Retail
http://biz.yahoo.com/p/b/bbby.html
STATUS: Completed the right side of its 3-month cup base, and is holding above support at 25.75 (September top, hit again in November) after pulling off the January high of 27.56. The stock hit other prices twice as well (25.94, 25.88 and 25.81), so support looks firm. The move up on lower volume (2.9 million; avg. 3.8 million) suggests the stock is ready to move in a rally. Great money flow, and relative strength has broken out ahead of price, a bullish sign.
BUY POINT: Breakout: 27.69, on volume of 5.7 million or better. Remains a buy on the breakout up to 29.07.
POSITION: Breakout: Stock and/or May $25 calls to buy (BHQ EE).

A small stock that looks great:

FRED (Fred's Inc--$23.50; +0.47; no options): Retail
http://biz.yahoo.com/p/f/fred.html
STATUS: A retail stock that is making its breakout move from a cup with handle (handle high, 23.88). Volume exploded to 305,000 (avg. 38,636) on the move up; look for the breakout on this momentum. Great money flow and high relative strength.
BUY POINT: Breakout: 24.01, on volume of 58,000 or better. Remains a buy on the breakout up to 25.21.
POSITION: Stock.

Continued Plays:

From the Thursday update:

SLR (Solectron Corp--$39.85; +0.03; optionable (SLR)): Printed circuit boards
http://biz.yahoo.com/p/s/slr.html
STATUS: Continues to consolidate on top of the 200 day MVA (39.74), showing its fourth consecutive doji in the handle of a 10-week base. Volume continues to build (reaching 6.5 million; avg. 6 million), so we are waiting for this one to explode from the tight lateral consolidation. Continues to tap resistance near 41. Good buying.
BUY POINT: 42.08, on volume of 8.8 million or better. Remains a buy on the breakout up to 44.18.
POSITION: Stock and/or April $40 calls to buy (SLR DH).

Continued Plays:

IBM (International Business Machines--$110.27; -3.78; optionable (IBM)): Computer hardware
http://biz.yahoo.com/p/i/ibm.html
STATUS: Pulled back in a second handle to the 21-week base, closing just under the 10 day MVA (110.70). The 200 day MVA is at 108.34, so expect a pullback to that level before the market rallies back. Volume continued to drop further below average (5.4 million; avg. 7.6 million). Handle high is 116.94. Good buying and money flow is holding steady.
BUY POINT: Aggressive: On a move back up from the 108.34 range, on rising volume.
Breakout: 117.07, on volume of 11.4 million or better.
POSITION: Aggressive: Stock and/or March or April $110 calls to buy (IBM CB or DB). Breakout: Stock and/or March or April $115 calls to buy (IBM CC or DC).

FLEX (Flextronics--$37.94; -0.94; optionable (QFL)): Electronics
http://biz.yahoo.com/p/f/flex.html
STATUS: Pulling back to support (10 day MVA, 37.64) after reaching a January high of 40.13 on Tuesday, after the stock tried a breakout move two days earlier. Volume spiked Thursday on a small move, dropping back the next day but remaining above average at 13 million (avg. 9.3 million). Looking for a move back up from the moving average. High money flow and good buying.
BUY POINT: Breakout: 40.26 on volume of 14 million.
POSITION: Stock and/or April $40 calls to buy (QFL DH).

BSC (Bear Stearns Companies--$61.80; -1.19; optionable (BSC)):
http://biz.yahoo.com/p/b/bsc.html
STATUS: Pulling back in another handle to its 20-week base (previous high 72.50) and holding above support (10 day MVA, 61.37) on continued decreasing volume (680,700; avg. 1.06 million). Handle high is 64.45, hit Wednesday when the stock sold back down close to the support. Looks good for a move up when the financials rally. Big money flow.
BUY POINT: Aggressive: Up from here on rising volume. Breakout: 64.58, on volume of 1.6 million. A buy on the breakout up to 67.81.
POSITION: Aggressive: Stock and/or April $60 calls to buy (BCS DL). Breakout: Stock and/or April $60 to $65 calls to buy (BCS DL or DM).

VRTY (Verity Inc--$29.50; -0.63; optionable (YQV)): Internet software
http://biz.yahoo.com/p/v/vrty.html
STATUS: Continues to range in the handle of the cup base, dropping back to close right below the 10 day MVA (29.77). Volume was up slightly but remains low, coming in at 286,600 (average 615,136). Pattern high is 32.75 (200 day MVA is at 32.62); looking for a breakout over the moving average. Still showing excellent money flow with good buying.
BUY POINT: Breakout: 32.88, on volume of 923,000 or better. Remains a buy on the breakout up to 34.52.
POSITION: Stock and/or June $30 calls to buy (YQV FF).

C (Citigroup--$55.46; -0.65; optionable (C)): Large Banks
http://biz.yahoo.com/p/c/c.html
STATUS: Dropped back to the 10 day MVA (55.45) on lower volume (8.65 million; avg. 13.3 million) in an orderly handle pullback to the 22-week base. Then previous handle high is the January high at 57.38. The low tapped support at the 18 day MVA (54.80). Looking for a breakout when the financials rally.
BUY POINT: Breakout: 57.51, on volume of 19.9 million or better.
POSITION: Breakout: Stock and/or March or June $55 calls to buy (C CK or FK).

JPM (J.P. Morgan & Co--$54.64; -1.21; optionable (JPM)): Banking
http://biz.yahoo.com/p/j/jpm.html
STATUS: Pulled back to support (10 day MVA, tested on the low of 54.29) in a new handle to the stock's 20-week base. Volume continues to fall farther below average (7 million; avg. 10 million) in a good-looking pullback, so we are looking for a breakout when the financials rally. New handle high is 57.38 (previous basing high, 58.38). High money flow and relative strength. A good-looking pattern.
BUY POINT: Aggressive: Up from here on stronger volume. Breakout: 57.51, on volume of 15 million or better. Remains a buy on the breakout up to 60.39.
POSITION: Aggressive: Stock and/or March or June $50 calls to buy (JPM FJ). Breakout: Stock and/or March or June $55 or $60 calls to buy (JPM CK or CL).

KEI (Keithley Instruments Inc--$60.67; -0.90; optionable (KEI)): Electronics (scientific and technical instruments)
http://biz.yahoo.com/p/k/kei.html
STATUS: An orderly pullback in a handle to the stock's 17-week base, as volume drew back below average from the late January (handle) high of 69.59 (347,500; avg. 484,000). Closed at support (10 day MVA), which is above the stock's down trendline (at the 18 day MVA, 57.15). Looking for a bounce back up and breakout in a market rally. Good buying.
BUY POINT: Aggressive: On a move up from here on rising volume. Breakout: 69.72, on volume of 726,000 or better.
POSITION: Aggressive: Stock and/or April $60 calls to buy (KEI DL). Breakout: Stock and/or April $60 calls to buy (KEI DL). April $65 calls have 43 open interests (KEI DM).

Some Put Plays: If the market turns to selling in earnest we are looking at playing the indexes lower as an easier way of jumping on the downside wagon. We don't like to short a market that has a lot going for it, so any play will be quick.

QQQ (Nasdaq 100--61.55; -3.60 (QQQ)):
STATUS: Tested the 50 day MVA Friday and then fell on rising volume. There is some support at 60 where it held in late November and bounced up off of after a test three weeks ago.
BUY POINT: On a move below 60.
POSITION: February $67 puts to buy on the move (QUE NO).

OEX (S&P 100 705.48; -14.22 (OEZ)):
STATUS: Closed on its 18 day MVA on slightly lower volume. There is some support at 700, and we want to see that broke in market selling before we will take positions to the downside.
POSITION: February 710 puts to buy on the move (OEZ NB).

Good Investing!
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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