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Begin Part 2 of 2
Note: The link in the market summary for the Nasdaq is incorrect. Please use the following link:
http://www.investmenthouse.com/cd/$compq.html
Best Plays Part 2: Keep an eye on AZPN and JPM as well.
1) ASD: In a very tight pattern now.
2) FAF: Trying a breakout move.
3) NEU: Tight doji on low volume in the pennant.
4) PNC: Still looking ready.
5) CSBI: Looking for the strong volume to break this one out.
6) FITB: Moving up on stronger volume.
7) ESRX: Moving up on stronger volume.
8) IBM: Making a breakout move.
Tests of the breakout, continued:
ASD (American Standard--$52.10; -0.19; optionable (ASD)): Materials and construction
http://biz.yahoo.com/p/a/asd.html
STATUS: This stock has formed a really nice pattern in the last several days, settling down after a bit of a ragged pullback and consolidation to test its recent breakout. Earnings were out before the open Tuesday, but the higher volume didn't move the stock. Still in the test, price is moving in an ascending wedge with a high of 52.85. ASD hit a breakout high of 53.69, so we will still look for a move over that price for an entry point. Really like the looks of the star doji (no difference between opening and closing prices) on lower volume (511,900; avg. 337,000).
BUY POINT: Over 53.69, on volume of 691,000 or better.
POSITION: Stock and/or April $50 calls to buy (ASD DJ).
SUB (Summit Bancorp--$42.20; +0.30; optionable (SUB)): Regional banks
http://biz.yahoo.com/p/s/sub.html
STATUS: Trying to hold together but slipped below the 18 day MVA (42.35) Tuesday. Volume rose to 454,000 (avg. 766,000) on the slight move up; the stock showed a doji to close after coming off the high of 42.62 (tapping the 10 day MVA). Look for a move over the intraday high. Outstanding money flow and high relative strength. The stock is testing the breakout from the January pennant. The financials are either going to break down or break out from here; it just depends on the market.
BUY POINT: Over 44.61 (consolidation high) on volume of 613,000 or better.
POSITION: Stock and/or April $40 calls to buy (SUB DH).
MER (Merrill Lynch & Co--$68.00; -3.40; optionable (MER, JMR)): Brokerage
http://biz.yahoo.com/p/m/mer.html
STATUS: Gave it up on this move below the 50 day MVA (40.04). Volume surged to 7.3 million (avg. 4.6 million) as brokerages were hit along with the tech sector today.
POSITION: None for now.
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 (from Monday):
GM (General Motors Corp--$56.15; -1.97; optionable (GM)):
http://biz.yahoo.com/p/g/gm.html
STATUS: Pulled back to test the 10 day MVA (55.77) support on the low of 55.89. Volume pulled back and remains strong at 3.9 million (avg. 3 million). Looking for a bounce back up in the ascending wedge, keeping an eye on the 18 day MVA (55.14) as lower support on a continued move down. We are looking for a move up to the 200 day MVA (63).
Pattern high is 57.13 (hit three times at the top of the pattern), which puts the stock at the buy point. Look for a continued breakout.
BUY POINT: Aggressive: On a bounce on rising volume. Breakout: 57.26, on volume of 4 million or better. A buy on the breakout up to 60.13.
POSITION: Aggressive: Stock and/or March or June $55 calls to buy (GM CK or FK). Breakout: Stock and/or June $55 or $60 calls to buy (GM FK or FL).
New Play (from the weekend):
NATI (National Instruments Cp--$52.88; +0.44; optionable (SJQ)): Computer peripherals
http://biz.yahoo.com/p/n/nati.html
STATUS: Moved just higher in the ascending wedge (pattern high is 53.13). Volume held at previous levels (158,700; avg. 232,000) on the move up, as the low tested support at the 10 day MVA (51.38), and the high tapped 53.50, above the pattern high. Looks ready for action, but needs volume. Looks like pretty sturdy support at 52 on a mild pullback. Money flow looks great, and relative strength is out ahead of price, a bullish sign.
BUY POINT: Breakout: 53.26, on volume of 313,000 or better.
POSITION: Stock. March and June $50 options have insufficient open interests (54 and 50 respectively). SJQ CJ or FJ
TD (Toronto Dominion Bank--$29.39; -0.21; optionable (TD)): Banking
http://biz.yahoo.com/p/t/td.html
STATUS: Pulled back to support in the ascending wedge (10 day MVA, where the stock closed). Volume shot up to 346,900 (avg. 94,454). This one is liable to drop to the 18 day MVA, tested on the low of 29.28, or the 50 day MVA (28.50), the support level from where TD launched its recent price run (and reaching a closing high of 30.09). Pattern high is 31.13.
BUY POINT: Aggressive: On a move up from the 29 range (18 day MVA) on continued strong volume. Breakout: 31.13, on volume of 128,000 or better.
POSITION: Stock and/or April $25 calls to buy (TD DE). Breakout: Stock and/or April $30 calls to buy (TD DF).
PNC (Pnc Financial Svcs Grp--$73.84; -0.16; optionable (PNC)): Banking
http://biz.yahoo.com/p/p/pnc.html
STATUS: Showing a tight doji that just slipped below the 10 day MVA (73.89) on stronger, average volume (1.1 million). The low tested support at the 18 day MVA (73.43). After a two-day pullback, we want to see this one move up from the doji. The stronger volume hints at a move up from here. Pattern high is 75.81.
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).
Pennants:
New Play:
USG (Usg Corp--$22.40; -0.07; optionable (USG)): Materials and construction
http://biz.yahoo.com/p/u/usg.html
STATUS: Below its 200 day MVA (27.37), but looks great in this pennant as volume steadily pulls back well below average (162,700; avg. 699,000). Holding above the 10 day MVA (22.39) in the tail of the pennant. 18 day MVA at 22.23 is reinforcing the support. We are looking for a move up to the 200 day MVA.
BUY POINT: Aggressive: Up from here on stronger volume. Breakout: 24.88, on volume of 944,000 or better. Remains a buy on the breakout up to 26.12.
POSITION: Aggressive: Stock. May $20 options have 93 open interests (USG ED). Breakout: Stock. Over 25, stock and/or May $22.50 calls to buy (USG EX).
New Play (from the weekend):
NCC (Nations City Corp--$27.60; -0.11; optionable (NCC)): Banking
http://biz.yahoo.com/p/n/ncc.html
STATUS: Price dropped back to the 50 day MVA (27.06) the last two days, and is holding just above there as volume keeps pulling back below average (618,200; avg. 1 million). We want to see the stock break back over the 18 day MVA (28.16) for taking positions in the pennant pattern, which has a high of 30.31. The stock has traded well above the 50 day MVA since November, and we are looking for support here. Huge money flow.
BUY POINT: 30.44, on volume of 1.35 million or better.
POSITION: Stock and/or April $30 calls to buy (NCC DF).
Continued Plays:
SWBT (Southwest Bancorp of Tx--$43.38; +0.75; optionable (ZRQ)): Regional banks
http://biz.yahoo.com/p/s/swbt.html
STATUS: This pattern continues to look good. The stock, on lower volume, dropped to a low of 41.88 (testing support at that level as noted in the previous report) but climbed back over the 10 day MVA (43). Pattern high is 45.63. Look for stronger volume to continue the move up toward a breakout (volume today was 201,600; avg. 237,000). Great money flow and good buying.
BUY POINT: Breakout: 45.76, on volume of 320,000 or better.
POSITION: Breakout: Stock and/or May $40 calls to buy (ZRQ EH).
FAF (First American Corp--$32.53; +1.15; optionable (FAF)): Insurance
http://biz.yahoo.com/p/f/faf.html
STATUS: Nice move up in the pennant as volume rose to 297,200 (avg. 314,000). Pattern high is 32.88, so look for a breakout on a continued move up. Money flow and relative strength are at high levels.
BUY POINT: Breakout: 33.01, on volume of 424,000 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--$79.31; -0.17; optionable (NEU)): Financial services
http://biz.yahoo.com/p/n/neu.html
STATUS: Has pulled back after trying a move out of its pennant last week, finding support at its 18 day MVA (79.28), showing a doji on that level today. Volume was very low at 60,100 (average 275,500). With the doji over support the stock is poised to make another move. Still showing good money flow and buying.
BUY POINT: Aggressive: A move backup over 82.50 on increased volume. Breakout: 85.82, on volume of 372,000.
POSITION: Both buy points: Stock and/or April $80 calls to buy (NEU DP Very low open interest).
CFBX (Community First Bankshrs--$19.44; +0.14; optionable (QSJ)): Regional Banks: Pacific
http://biz.yahoo.com/p/c/cfbx.html
STATUS: Tried to break out of the pattern, hitting our buy point (19.63) and up to 19.94 before pulling back for a loose doji, remaining over support of its 18 day MVA (19.11). Volume was up (129,500; average 140,500) but below the 190,000 level we were looking for. We will look for another breakout attempt, this time with sufficient volume. Great money flow and relative strength has moved out ahead of price.
BUY POINT: A move to 20.07, on volume of 190,000 or better.
POSITION: Stock and/or May $17.50 (QSJ EW) and $20 (QSJ ED) calls to buy (very low open interest).
EDS (Electronic Data Systems--$56.90; -1.65; optionable (EDS)): Software
http://biz.yahoo.com/p/e/eds.html
STATUS: Beat earnings in an after-hours announcement, and we trading back over 60 on the news. The stock had dropped back in its ascending wedge intraday, holding its 18 day MVA (56.64) on the move. The pattern high was 60, so we will see if the stock opens over that level. If it takes off initially, we can look at positions on a move back after its initial surge, perhaps catching support in the 60 range before moving up.
BUY POINT: A move over 60 (or with a gap over 60, on the initial morning pullback). Look for continued strong volume (2.24 million today; average 2 million).
POSITION: Stock and/or June $55 calls to buy (EDS EK).
CSBI (Century South Banks Inc--$33.63; +0.48; no options):
http://biz.yahoo.com/p/c/csbi.html
STATUS: A financial that continues its pennant consolidation on low volume, showing yet another doji, but with much heavier volume (118,900; average 83,300). The stock continues to hold support at its short-term MVA's (10 and 18 day MVAs at 33.42 and 33.31, respectively), and look for a breakout in a market rally. Outstanding money flow and good buying. Great shakeout.
BUY POINT: Breakout: 34.85, on volume of 112,500 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 Play:
FITB (Fifth Third Bancorp--$58.50; +1.25; optionable (FTQ)): Regional banks
http://biz.yahoo.com/p/f/fitb.html
STATUS: Pulling back in the handle of a double-bottom pattern, moving back up today over its 18 day MVA (57.68) after having made a four-day pullback. Volume was up but continued to be rather low at 1.43 million (average 2.2 million). Handle high is 59.38; look for the breakout over that price on appropriate volume. The stock hit a high of 61.31 in January. High money flow and good buying.
BUY POINT: 59.51, on volume of 3 million or better. Remains a buy on the breakout up to 62.49.
POSITION: Stock and/or May $55 calls to buy (FTQ EK).
Some trading plays:
A New Play:
HWP (Hewlett-Packard Co--$36.00; -0.79; optionable (HWP)): Computer hardware
http://biz.yahoo.com/p/h/hwp.html
STATUS: Still looking good in a handle to its cup base, today pulling back a bit but holding over support of its 50 day and 18 day MVA's (35.39 and 35.21, respectively) with a doji pattern. Holding support is encouraging, and from the doji we will look for the stock to make a move back up toward the handle high of 37.90. We will need a volume surge, but it has been holding at rather low levels (4.86 million today; average 8.5 million).
BUY POINT: Over 38 on volume of 12 million or better.
POSITION: Stock and/or May $35 calls to buy (HWP EG).
Continued trading plays (from the weekend report):
ESRX (Express Scripts Inc--$99.63; +2.94; optionable (XTQ)): Health services
http://biz.yahoo.com/p/e/esrx.html
STATUS: Made a nice move that finally had some volume behind it (up to 640,200; average 648,100) as it ran into earnings and closed just under the high in the handle of its double-bottom pattern (100). Was trading back a bit after hours although it beat estimates, so we will see where it opens tomorrow, looking for it to hold support over 95-96 for another attempt at breaking out.
BUY POINT: On a strong move back up after visiting 95-96. Breakout: 100.13, on volume of 972,000 or better.
POSITION: Pullback: Stock and/or May $90 calls to buy (XTQ ER). Breakout: Stock and/or May $95 calls to buy (XTQ ES). Use care with options, as there is low open interest.
AZPN (Aspen Technology Inc--$39.84; -1.16; optionable (ZQP)): Software
http://biz.yahoo.com/p/a/azpn.html
STATUS: Tested back to its 10 day MVA (38.37) before closing with a loose doji in the upper portion of the handle to its 22-week cup base. The move, which came on lower volume of 405,700 (average 355,000), followed Tuesday's strong move that saw the stock jump from the 10 day up near the handle high of 41.25. Still looking for a breakout, although the pattern suggests a possible move back to support before we get another strong move. Good buying and high money flow remain.
BUY POINT: 41.38, on volume of 530,000 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) has low open interest).
BBBY (Bed Bath & Beyond Inc--$27.00; 0.00; optionable (BHQ)): Retail
http://biz.yahoo.com/p/b/bbby.html
STATUS: Moved up in its handle (to its three-month cup base) Tuesday, hitting a new closing high, but followed up with a doji today. That indicates a pullback to the 18 day MVA (25.16) for a move back up; however, we will continue to look for a break over the handle high (and the stock's high) at 27.56 on higher volume (up sharply today at 3.75 million; average 3.83 million). Great money flow and buying, and relative strength broke 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--$23.00; -0.38; no options): Retail
http://biz.yahoo.com/p/f/fred.html
STATUS: A retailer that is moving in a handle to its five-month cup base, today moving down and showing a doji over the support of its 18 day MVA (22.79). Volume has steadily decreased on the stock's recent retreat in the handle, coming in at 20,700 today (average 38,600). Looking for a move back up off of the doji toward the handle high at 23.88. Great money flow and high relative strength.
BUY POINT: Breakout: 24.01, on volume of 58,000. Remains a buy on the breakout up to 25.21.
POSITION: Stock.
Continued Plays:
SLR (Solectron Corp--$32.45; -3.95; optionable (SLR)): Printed circuit boards
http://biz.yahoo.com/p/s/slr.html
STATUS: From its handle consolidation the stock has fallen back hard through its 200 day and 50 day MVA's (at 39.61 and 37, respectively), selling on big volume today (11.9 million; average 6 million). We will see where it catches support and evaluate it then.
IBM (International Business Machines--$116.91; +2.72; optionable (IBM)): Computer hardware
http://biz.yahoo.com/p/i/ibm.html
STATUS: Made a strong move up, hitting our buy point (although volume at 9 million was lower than the 11.4 million we were looking for; average is 7.6 million), before closing just below the former handle high. Looking good, and we will look for a continued move up out of the handle to the stock's 21-week base. Still showing solid buying, and relative strength has broken out ahead of price.
BUY POINT: A move over 117.60 on volume of volume of 11.4 million.
POSITION: Stock and/or March or April $115 calls to buy (IBM CC or DC).
FLEX (Flextronics--$33.94; -2.94; optionable (QFL)): Electronics
http://biz.yahoo.com/p/f/flex.html
STATUS: Dropped out of the handle and closed just above the 50 day MVA (33.56) as volume rose to 17.5 million (avg. 9.4 million). Can bounce back (the stock has made some solid moves from here), but after losing the pattern we aren't looking at positions until the stock moves back into the 38 range.
POSITION: None for now.
BSC (Bear Stearns Companies--$59.50; -1.52; optionable (BSC)):
http://biz.yahoo.com/p/b/bsc.html
STATUS: Fell back in its handle to its 20-week base (previous high 72.50), breaching its short-term MVA's (10 day and 18 day at 61.07 and 59.96, respectively) as it sold on increased volume (691,600; average 1 million). The stock has possible support from some January levels at the 57.50 level, and the 50 day MVA (at 56.81). We will see if it holds; financials could go either way at this point, either rallying strong or selling off. Handle high is out at 64.45. Money flow is still strong.
BUY POINT: Aggressive: A move back over 62 on increased volume.
POSITION: Aggressive: Stock and/or April $60 calls to buy (BCS DL).
VRTY (Verity Inc--$27.88; -1.68; optionable (YQV)): Internet software
http://biz.yahoo.com/p/v/vrty.html
STATUS: Pulled back into the lower range of its handle (to its 5-month cup base), closing over support of January lows at 27.50 and the 50 day MVA (at 26.78). Volume remained rather low on the move, at 309,900 (average 612,000), so we will look for it to hold for a move back up with stronger volume. The high in the pattern is 32.75, which is just above its 200 day MVA (32.67), the line that has defined the upper limit in the handle consolidation. Still showing excellent money flow with good buying.
BUY POINT: Aggressive: Over 30 on increased volume. Breakout: 32.88, on volume of 918,000 or better. Remains a buy on the breakout up to 34.52.
POSITION: Aggressive: Stock and/or June $25 calls to buy (YQV FE). Breakout: Stock and/or June $30 calls to buy (YQV FF).
C (Citigroup--$54.36; -0.77; optionable (C)): Large Banks
http://biz.yahoo.com/p/c/c.html
STATUS: Had been pushing up along its short-term MVA's (10 day and 18 day at 55.31 and 54.91) as it moves in the handle to its 22-week cup base, but dropped back the last two days to close below that support. Volume was up on the selling at 10.1 million, but still below the average of 13.2 million. We will see if it holds support at the 50 day MVA (53.41), which is also in the range of its December high. Another financial that we will look at for a possible move up if it can hold.
BUY POINT: Breakout: 57.51, on volume of 19.8 million or better. Aggressive: In a financials rally, a move back over 56 on increased volume.
POSITION: Breakout: Stock and/or March or June $55 calls to buy (C CK or FK). Aggressive: Stock and/or March or June $50 calls to buy (C CJ or CJ).
JPM (J.P. Morgan & Co--$52.33; +0.05; optionable (JPM)): Banking
http://biz.yahoo.com/p/j/jpm.html
STATUS: Has pulled back in the handle to its 20-week cup base, Monday dropping back through its 18 day MVA (53.09). Today the stock tapped back up to its 10 day at its high of 53.50 but could not hold the move, drawing back to close with a doji back under its 18 day. The doji indicates a move back up, but as with the other financials, we will see if the sector can rally. On a move up we will need to see bigger volume (up slightly today at 7.98 million; average 10 million). The handle high ahead at 57.33 (previous basing high, 58.38).
BUY POINT: Aggressive: A move over 54 on average or better volume. Breakout: 57.46, on volume of 15 million or better.
POSITION: Aggressive: Stock and/or March or June $50 calls to buy (JPM FJ). Breakout: Stock and/or March or June $55 calls to buy (JPM CK or JPM FK).
KEI (Keithley Instruments Inc--$54.30; -6.69; optionable (KEI)): Electronics (scientific and technical instruments)
http://biz.yahoo.com/p/k/kei.html
STATUS: After a failed breakout attempt the stock has steadily pulled back, but today closed back under its 200 day MVA (55.36) on high volume selling (up to 645,500; average 480,500). KEI managed to close above this level on its last two visits (Monday and late-January), and we will see if it can quickly recover (the 50 day MVA is just below at 52.94). Not a great play at the moment.
BUY POINT: Aggressive: On a move back over 60 on continued strong volume.
POSITION: Aggressive: Stock and/or April $55 calls to buy (KEI DK).
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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