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us stock market, top stock pick
Begin Part 2 of 2
Note: The Nasdaq chart link in the market summary is incorrect. Please use the following chart link:
http://www.investmenthouse.com/cd/$compq.html
THE PLAYS:
A note on options: The symbol in the parenthesis represents the option prefix for a particular stock. It usually does not change. The last two letters indicate the month and the strike price. We are striving to make sure they are accurate, but please be sure to double check them when you place any order to make sure you are buying the right option.
Please note that when we reference the 10, 18, and 50 day moving averages (MVA), those are exponential moving averages (EMA). The 200 day moving average is always simple (SMA). We will note when we reference a particular MVA differently, e.g., a simple 50 day MVA.
NOTE: A frustrating market today, but stocks are still setting up well, and some are making strong moves, e.g., TSFG from last night. Retail and software stocks are looking good tonight.
SUBSCRIBER'S CHOICE:
HOTT (Hot Topic Inc--$24.94; +0.81; optionable (UHO)): Consumer Non-Durables: Apparel
STATUS: Moved up from support (18 day MVA, 23.59) on stronger (though still well below average) volume of 299,700 (avg. 455,272). The stock hit a new all-time closing high in late January at 26.56, pulling back from there on some selling and some normal low-volume consolidation. The stock moved laterally for the previous two days, just below the 10 day MVA (24.42), enough of a rest to pave the way for this stronger move. Needs stronger volume to keep it going, however. Great money flow and high relative strength.
BUY POINT: Over the recent highs at 26.88, on volume of 405,000 or better.
POSITION: Stock and/or May $22.50 calls to buy (UHO EX). May $35 options have only 35 open interests.
http://www.investmenthouse.com/cd/hott.html
(Click to view the chart)
http://biz.yahoo.com/p/h/hott.html
Best Plays: We like all the plays we put on the Daily, but these we are really focusing on tomorrow.
1) PRGN: An updated stock that is moving up on good volume.
2) MSFT: Going to try a breakout.
3) AEOS: A new all-time closing high on strong volume.
4) CHCS: Shot up on good news.
5) SEBL: Can make a quick move to the 50 day MVA.
6) GMST: Has been showing signs, and now is moving.
7) CHKP: Holding up well a week before its stock split.
New Play: Software continues to look good.
PRGS (Progress Software Corp--$15.06; +0.12; optionable ( RGQ): Application Software
STATUS: The stock is in an ascending wedge on overall decreasing volume (118,000; avg. 182,318), though a volume spike was thrown Tuesday. That is a good sign for a strong move up; pattern high is 15.44. The wedge formed near the bottom of the stock's lengthy base (bottom near 11 and prior high of 30), and is squeezing into its tail between the 200 day MVA (15.03) and the short term moving averages (10 day MVA, 14.92). That pinch resulted in the stock opening above the 200 day MVA and its closing just above it. Nice position for a move up on stronger volume. Big money flow into this stock.
BUY POINT: 15.57, on volume of 246,000 or better. Remains a buy on the breakout up to 16.35.
POSITION: Stock and/or June $15 calls to buy (RGQ FC).
http://www.investmenthouse.com/cd/prgs.html
(Click to view the chart)
http://biz.yahoo.com/p/p/prgs.html
Updated software stocks that are looking good:
PRGN (Peregrine Systems Inc--$29.75; +1.12; optionable (GQP)): Application Software
STATUS: On Monday's report as a cup with handle pattern ready to move into its breakout. Prior high in this base (which is at the bottom of the stock's larger, 10-month base) is 38.11. PRGN pulled back to the 18 day MVA the last two days, Wednesday moving up from there on good volume (3.4 million; avg. 3 million). Handle high is 33.13. Stock shows good buying.
BUY POINT: Aggressive: On further upward movement on continued rising volume. Breakout: 33.26, on volume of 4.5 million or better. Remains a buy on the breakout up to 34.92.
POSITION: Aggressive: Stock and/or April $25 calls to buy (GQP DE). Breakout: Stock and/or April $30 calls to buy (GQP DF).
http://www.investmenthouse.com/cd/prgn.html
(Click to view the chart)
http://biz.yahoo.com/p/p/prgn.html
MSFT (Microsoft Corp--$64.69; +2.13; optionable (MSQ)): Application Software
STATUS: Nice move up on stronger volume (63 million; avg. 46.2 million) as the stock makes a breakout move from a cup base that has a bit of a ragged handle on news of a hearing on the trial judge's alleged bias. That has people thinking mistrial and a Bush administration that won't pursue the remedy. A huge development. Volume was below average and decreasing in the handle, with price just a little jumpy. Nonetheless, the stock shot up to resistance (200 day MVA, tested on the high of 65.06). Handle high is 64.75, making the normal buy point at 64.88. We are pushing it up to above the 200 day MVA. We are usually not crazy about patterns below the 200 day MVA, but if MSFT can make the buy point on increasing volume, that level can then support a continued move up in the 13.5-month base.
BUY POINT: Over 65.06, on volume of 69 million or better.
POSITION: Stock and/or April $65 calls to buy (MSQ DM).
http://www.investmenthouse.com/cd/msft.html
(Click to view the chart)
http://biz.yahoo.com/p/m/msft.html
Updated retail stocks that continue to look good:
ANF (Abercrombie & Fitch Co--$31.15; +0.67; optionable (ANF)): Apparel Stores
STATUS: We looked at ANF back on November 8 as it set up from a breakout that took it to a closing high that month of 29.63. After correcting from that high to a December low of 14.75, ANF has climbed steadily to today's closing high that is just over that earlier November high. A nice run, to say the least. The stock pulled back three days until mounting a nice two-day move (the last two sessions) on strong volume (reaching 2.5 million today; avg. 1.75 million). Look for the 30-31 level to support the stock when it decides to take a rest. Very high relative strength. The stock in climbing up the right side of a 22-month base (prior high of 50.75).
BUY POINT: Aggressive: On further upward movement on continued rising volume. Safer: On a move back up after a pullback to 30-31.
POSITION: Aggressive: Stock and/or May $30 calls to buy (ANF EF).
http://www.investmenthouse.com/cd/anf.html
(Click to view the chart)
http://biz.yahoo.com/p/a/anf.html
AEOS (American Eagle Outfitter--$58.25; +1.12; optionable (AQU)): Apparel Stores
STATUS: Back to one of our favorite retail stocks. AEOS hit a new all-time closing high Wednesday on the heels of two-day move off the 10 day MVA (55.03) on strong volume (2.3 million Wednesday; avg. 1.38 million). The closing price remains below the stock's previous basing high of 58.50, so look for the breakout over that price on even stronger volume (high was 59.88). The consolidation comes after the recent breakout at the end of January. Huge money flow into this stock, high relative strength and decent buying.
BUY POINT: 58.63, on continued rising volume.
POSITION: Stock and/or May $55 calls to buy (AQU EK).
http://www.investmenthouse.com/cd/aeos.html
(Click to view the chart)
http://biz.yahoo.com/p/a/aeos.html
CHCS (Chico's Fas Inc--$39.00; +3.50; optionable (HNU)): Apparel Stores
STATUS: Another stock we like. CHCS took off today on strong volume (1.2 million; avg. 501,590), after showing a tight doji that for all purposes looked like it marked the top of a four-day price run. However, news of outstanding January sales set off the strong move, which put the stock just below possible resistance at 39.50 (hit 5 times since August). That may not be a problem on the strength of this move. Relative strength has broken out ahead of price, a bullish sign, and money flow is turning back up. The stock hit a November high of 43.50.
BUY POINT: Over 39.50 on continued strong volume.
POSITION: Stock. Over 40, stock and/or May $40 calls to buy (HNU EH).
http://www.investmenthouse.com/cd/chcs.html
(Click to view the chart)
http://biz.yahoo.com/p/c/chcs.html
THE PORTFOLIOS: Each report, we look at these to see which is in a buy position. We don't cover them all each time, just the ones that are looking as if they are ready to pick up a few shares.
THE LEADERS:
ADBE, AMCC, ARBA, BEAS, BRCD, CIEN, EMC, EXTR, GLW, JNPR, NEWP, NTAP, PMCS, SCMR, SEBL, VRSN, VRTS
SEBL (Siebel Systems Inc--$64.63; -1.62; optionable (SGW)): Computer Software & Services: Application Software
STATUS: Showing a doji at the top of its intraday trading range and coming nicely off the low of 61.56. Volume was stronger at 11.4 million (avg. 11.6 million). Such dojis suggest a move up, especially since it comes after a move down in the stock, and on the stronger volume. We are looking for a bump up to the 50 day MVA (75.31). Possible resistance at the 66 level.
BUY POINT: Aggressive: On a move up from here on average or better volume.
POSITION: Aggressive: Stock and/or May $60 calls to buy (SGW EL).
http://www.investmenthouse.com/cd/sebl.html
(Click to view the chart)
A couple of possible covered call plays:
CIEN (Ciena Corporation--$81.88; -0.81; optionable (UEE DP)): Telecommunications: Processing Systems & Products
STATUS: We are seeing support levels melt this week, and CIEN followed suit, dropping below 82.50 but still holding its ground pretty well after hitting a low of 77.50. Volume remained high but down at 1.9 million (avg. 14.8 million) as the stock showed a doji near the top of its range. The high of 83.63 tapped the down trendline (Oct/Dec highs), so the stock can move up to that level, but unless the market turns around, the stock can then drop back down to the low of 77.50 or lower after testing that down trendline. On a failed attempt at breaking the down trendline we will look at selling covered calls on long term stockholdings.
BUY POINT: On a move down from the 83 level after a move up to test the resistance (down trendline). Look for continued strong, preferably rising, volume.
POSITION: February $80 calls to sell (UEE BP).
http://www.investmenthouse.com/cd/cien.html
(Click to view the chart)
EMC (Emc Corp--$65.39; -4.61; optionable (EMB)): Computer Hardware: Data Storage Devices
STATUS: Dropped from a Tuesday doji (that came after the stock had already been falling below its 50 day MVA) on very strong volume (24 million; avg. 14.1 million). The stock did come up from a low of 62.48, but the signs are pointing down: money flow and relative strength dropped, buying turned negative. Look for a move back down on continued strong volume.
BUY POINT: Aggressive: On a move down from here on continued strong volume.
POSITION: Aggressive: February $65 calls to sell (EMB BM).
http://www.investmenthouse.com/cd/emc.html
(Click to view the chart)
UP & COMERS PORTFOLIOS:
EXDS, TQNT, BVSN, SANM, PKI and GMST for now.
GMST (Gemstar-TV Guide Intl--$54.19; +3.75; optionable (GST)): Consumer Durables: Electronic Equipment
STATUS: A refreshing move in today's market, GMST popped back over its 50 day and short term moving averages on strong volume (7.5 million; avg. 4.3 million). The stock recently tried to break out from its ascending wedge pattern, but pulled back below the 50 day MVA (50.59) before today's move. Former pattern high is 56.28; breakout high was 59.56, above the 200 day MVA (57.93). Looking for a continued move up on the volume momentum. Up slightly in after hours trading (at the time of this writing).
BUY POINT: Aggressive: On further upward movement on continued strong volume. Safer: Over 58 (200 day MVA) on continued strong volume.
POSITION: Aggressive: Stock and/or May $50 calls to buy (GST EJ). Safer: Stock and/or May $55 calls to buy (GST EK).
http://www.investmenthouse.com/cd/gmst.html
(Click to view the chart)
MEMBER PORTFOLIO: BRCM, CHKP, CSCO, EMLX, IDTI, INTC, JDSU, MVSN, NT, PWER, SUNW, VTSS
CHKP (Check Point Software Tech--$146.56; -1.07; optionable (KGE)): Computer Software & Services: Security Software & Services
STATUS: Holding up well in the market selling, the stock closing the last three days right above its 18 day MVA (146.01). The stock tested lower support (50 day MVA, 140.41) two of those days, Wednesday coming off a low of 139 on stronger volume (5.65 million; avg. 5.2 million). The high tapped resistance (10 day MVA, 148.68), so look for a move over that level for the aggressive play. Overhead supply is plentiful up to the 170 level, but when the market is rallying, CHKP has sliced through that with ease, and on volume not much higher than today's. This is one of those stocks we referred to as being able to run up faster than most in a rally. Since it may be short term, that gives us more bang for the time we are in the play.
BUY POINT: Aggressive: Over 149 on volume of 7.6 million or better.
POSITION: Aggressive: Stock and/or April $145 (KGE DI), or, for a move over 150, stock and/or April $150 calls to buy (KGE DJ).
http://www.investmenthouse.com/cd/chkp.html
(Click to view the chart)
VTSS (Vitesse Semiconductor--$62.75; -1.50; optionable (VQT)): Electronics: Semiconductor, Integrated Circuits
STATUS: Trying to hold together after dropping to a low of 58.44 but coming back to nearer the high (63.75), just under the 50 day MVA (63.33). The stock, on stronger volume (10.4 million; avg. 6.4 million), looks ready to break the resistance at the moving average, but has an added surprise there: the down trendline (August/November highs) slices down just above the closing price. If the stock can break the combined resistance, we might see a nice pop higher to 68 or beyond. Not a huge gain, but we will take the single and move on if we can. 18 day MVA is at 65.91; 10 day MVA at 66.99.
BUY POINT: Over 64 on continued rising, strong volume.
POSITION: Aggressive: Stock and/or April $60 calls to buy (VQT DL).
http://www.investmenthouse.com/cd/vtss.html
(Click to view the chart)
Can go either way, depending on the market:
EMLX (Emulex Corp--$81.75; -10.75; optionable (UEL)): Computer Hardware: Peripherals
STATUS: Broke below the 50 day MVA (84.56) on strong volume (8.3 million; avg. 4.77 million), coming to rest on the simple 50 day MVA. EMLX tested 80 on the low, a price hit three times since December, and closed on the 50 day MVA (simple), but in this market we have seen support levels dissolve easily. We like to see strong stocks like this one make quick moves back over the 50 day MVA. EMLX is another one of the stocks that tends to move more than other stocks when the market rallies or falls, so it is one we like to play. 18 and 10 day MVAs are at 92.42 and 92.70, respectively.
BUY POINT: Upside: We will play a bounce up from this level if the Nasdaq follows through tomorrow on the late rally, picking it up on the first pullback that tests the open price or the previous close. Downside: It has been hit hard, but can give us more downside if it cannot break back above the exponential 50 day MVA. On a move below 80 on continued strong volume.
POSITION: Upside: Stock and/or April $85 calls to buy (UEL DQ). Downside: Covered call or Put: February $75 calls to sell (UEL DO), and/or April $80 puts to buy (UEL PP).
Good Investing!
Jon Johnson and The Daily 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.
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us stock market
top stock pick
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