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Begin Part 3 of 3
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.
SUBSCRIBER'S CHOICE:
ERICY (Lm Ericsson Telephone Co--$9.69; -0.81; optionable (RQC)): Telecom
STATUS: The stock dropped below its January low of 10.06 Friday to hit a new 52-week low on strong volume (39.4 million; avg. 17.3 million). The stock was sold on news that Motorola was cutting jobs due to slower demand, and on news of a possible investigation of accounting practices at Lucent Technologies. Below this level the stock has some old support from the fall of 1999 at the 8.19 level, or even higher (the 8.50 range). The stock shows decent buying, though money flow and relative strength have turned down. We are not looking at positions in this stock until we see a strong move back over the 50 day MVA (12).
http://www.investmenthouse.com/cd/ericy.html
(Click to view the chart)
http://biz.yahoo.com/p/e/ericy.html
Best Plays: We like all the plays we put on the Daily, but these we are really focusing on for the next session.
1) EBTB: Just about ready to move up after this test.
2) ALT: Ditto.
3) TIER: Another stock that is close to the end of a breakout test.
4) PRGO: Nice-looking ascending wedge.
5) NFB: An updated pennant that still looks great.
6) EXTR: A tight doji on low volume for an aggressive upside play.
7) EMLX: Looks ready to move up in the right conditions.
New Plays: Looking at some small stocks that are in great patterns.
EBTB (Eb2b Commerce Inc--$1.94; -0.06; no options): Business Software
STATUS: The new issue (August) is in a 12-week base cup with handle base at the bottom of a larger base and is pulling back to support (10 day MVA, 1.79). Volume is steadily decreasing (20,000; avg. 79,863) as price drops, in the orderly pullback that is forming the handle, the kind of pullback that tends to indicate a good move back up. As volume is quite low; this pullback is nearly over. Can still hit the 10 day MVA before heading up. Good buying and strong money flow.
BUY POINT: Back over 2.66 on volume in the range of 27,000, or, on a move up from 1.79 or better on rising volume.
POSITION: Stock.
http://www.investmenthouse.com/cd/ebtb.html
(Click to view the chart)
http://biz.yahoo.com/p/e/ebtb.html
ALT (Alteon Inc--$5.91; -0.23; no options): Drug Manufacturers
STATUS: A new issue (August 8) that is in a cup with handle base of twelve weeks (prior high of 8.31). Price is pulling back to support in the handle (10 day MVA, tested on the low of 5.80) as volume dries up below average in an orderly manner (48,500; avg. 115,545). Looking for a breakout over the handle high of 6.50. Good money flow and buying.
BUY POINT: 6.63, on volume of 173,000 or better.
POSITION: Stock.
http://www.investmenthouse.com/cd/alt.html
(Click to view the chart)
http://biz.yahoo.com/p/a/alt.html
TIER (Tier Technologies Inc--$8.63; -0.12; no options): Software: Information & Delivery Service
STATUS: In a 13-month base, and testing its recent breakout from an ascending wedge-type consolidation as it forms a handle to the base. The stock is now in a short ranging pattern in the test, and volume is dropping off nicely below average (reaching 33,400 Friday; avg. 101,090). Pattern high is 9.75 (breakout high is 9.38). The stock showed a doji near its high (8.75) after tapping near support (8.44, hit twice in the ranging pattern). The 10 day MVA is at 8.37. Looking for a move up soon. Buying is strong. The company reported record earnings January 25.
BUY POINT: 9.88, on volume of 136,000 or better.
POSITION: Stock.
http://www.investmenthouse.com/cd/tier.html
(Click to view the chart)
http://biz.yahoo.com/p/t/tier.html
PRGO (Perrigo Co--$9.81; +0.06; no options): Drug Related Products
STATUS: Testing its breakout from a lengthy cup with handle base, and has formed an ascending wedge in the process. Support is at the 10 day MVA (9.61) while the stock appears to be holding higher support at 9.75, hit seven times in the wedge. Showed a doji Friday as volume shot to 921,300 (avg. 259,000). Look for a breakout over the pattern high of 10.13. Good buying and money flow, and relative strength has moved out ahead of price, a bullish sign. The company beat earnings estimates by 8 cents in the December report.
BUY POINT: 10.26, on continued strong volume (has already reached breakout volume, the minimum of which should be 350,000).
POSITION: Stock.
http://www.investmenthouse.com/cd/prgo.html
(Click to view the chart)
http://biz.yahoo.com/p/p/prgo.html
MFSF (Mutualfirst Financial--$14.63; +0.07; no options): Savings & Loan
STATUS: In a flat base/pennant consolidation with a high of 14.88 on overall below average volume (dropping to 15,900; avg. 23,636). The pattern is supported by the 10 and 18 day MVAs (14.58 and 14.55, respectively) and has formed as a test of the stock's recent breakout from a similar pattern. Looking for a breakout on a volume surge. The stock shows great money flow, a high relative strength, and good buying. The company in late January announced its intention to repurchase up to 10% of its outstanding shares from time to time depending upon market conditions. It has trended up nicely since its issue early last year. NOTE: This is a very thinly traded stock.
BUY POINT: 15.01, on volume of 32,000 or better.
POSITION: Stock.
http://www.investmenthouse.com/cd/mfsf.html
(Click to view the chart)
http://biz.yahoo.com/p/m/mfsf.html
Updates:
NFB (North Fork Bancorp--$24.54; +0.21; optionable (NFB)): Regional Banks: Northeast
STATUS: Made a move up in the ascending wedge pattern on stronger volume (536,400; avg. 577,090). This is one financial stock that is holding a good-looking pattern, and looks ready to move higher. Pattern high is 25. Great money flow and good buying.
BUY POINT: Breakout: 25.13, on volume of 779,000 or better. Remains a buy on the breakout up to 26.39.
POSITION: Stock and/or March or May $25 calls to buy (NFB CE or EE).
http://www.investmenthouse.com/cd/nfb.html
(Click to view the chart)
http://biz.yahoo.com/p/n/nfb.html
NSIT (Insight Enterprises Inc--$26.95; -0.19; optionable (QNT)): Retail: Catalog Sales
STATUS: Looks quite tight in the handle pullback, showing a tight doji on below average volume (that rose to 480,100; avg. 709,318). The doji is sitting on the 10 day MVA, but is below the 200 day MVA (28.07). However, the pattern looks good and we are looking for a move up from here on continued rising volume for a breakout. Stock shows good money flow and buying.
BUY POINT: Breakout: 30.07, on volume of 1 million or better.
POSITION: Breakout: Stock and/or May $30 calls to buy (QNT EF).
http://www.investmenthouse.com/cd/nsit.html
(Click to view the chart)
http://biz.yahoo.com/p/m/nsit.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: These are in trouble, but may find some room to move up after a long selling bout that has taken many down to their early year lows, and several are showing dojis after several days on decline. These are quick plays as the patterns are not stellar. Take some profit in a rally and get out.
ADBE, AMCC, ARBA, BEAS, BRCD, CIEN, EMC, EXTR, GLW, JNPR, NEWP, NTAP, PMCS, SCMR, SEBL, VRSN, VRTS
EXTR (Extreme Networks Inc--$30.94; -0.37; optionable (EUT)): Internet: Internet Software & Services
STATUS: Didn't lose much in Friday's selling, and showed a tight doji on volume that dropped abruptly below average (3.9 million; avg. 6.57 million). Right at its 52-week lows, this is a stock we love to trade. If it finds bottom here, we are looking for a turn back up for a quick upside play. The 10 day MVA is at 37.21. Look for stronger volume on the move up. The stock was trading at 31.13 in after hours trading (at the time of this writing).
BUY POINT: On a move up from here, on rising volume.
POSITION: Stock. June $30 calls (EUT FF) have 77 open interests.
http://www.investmenthouse.com/cd/extr.html
(Click to view the chart)
VRSN (Verisign Inc--$59.94; -1.69; optionable (VUQ)): Internet Software & Services
STATUS: Showing a tight doji near the top of its trading range (high of 61.31 and low of 58.63) as volume rose to average levels (6.69 million). Stronger volume on dojis can indicate a reversal of recent selling. Looking for a move up from here after the stock has dropped steadily over the last 9 days. 10 day MVA is at 68.14. VRSN reported earnings (January 25) that beat estimates, and upped revenue estimates for 2001, but still got taken down. Registration of domain names (part of the business for which the versatile company is best known) dropped off less than a percentage point and that shook investors, although such a decline is to be expected; the focus should be more on renewals of existing domain names.
BUY POINT: Aggressive: On a move up from the doji on continued rising volume.
POSITION: Aggressive: Stock. June $55 (QVR FK) and (for a move over 60) June $60 (QVR FL) calls have 32 and 59 open interests (respectively).
http://www.investmenthouse.com/cd/vrsn.html
(Click to view the chart)
BRCD (Brocade Communications--$74.13; -0.46; optionable ( )): Computer Hardware: Computer Periperals
STATUS: The computer peripheral stock is showing a tight doji near its intraday high (76.75; low is 71.44) on volume that dropped lower to 10.4 million (avg. 7.9 million). BRCD has been falling from the January high of 112 for over two weeks, and was hit with some high-volume selling the last two days of the week. Volume remains above average, but we are watching the doji after this sector held up pretty well Friday. The stock hit a low in January of 65.75.
BUY POINT: Aggressive: On a move up from the doji on rising volume.
POSITION: Aggressive: Stock. April $70 calls to buy (UBZ DN) have 50 open interests, less than the 100 we like to have on trading options).
http://www.investmenthouse.com/cd/brcd.html
(Click to view the chart)
BEAS (Bea Systems Inc--$52.88; +0.22; optionable (BUC)): Computer Software & Services: Business Software & Services
STATUS: Another stock showing a doji on lower volume after a three-day drop, two of those days on selling that broke the stock below the 200 day MVA (59.34). A move below that moving average is never a good thing, but the stock looks ready to move back up, coming off the low of 50, or at least hold here until a rally. A Dain Rauscher Wessels equity analyst Thursday reiterated a strong buy rating on the stock, with a 6-month price target of $100 .
That isn't gospel, but in this environment when a downgrade can tank a good stock, it doesn't hurt to hear some positive comments.
BUY POINT: Aggressive: On a move up from here on stronger volume (which Friday dropped back to 10 million; avg. 11 million).
POSITION: Aggressive: Stock and/or June $50 calls to buy (BUC FJ).
http://www.investmenthouse.com/cd/beas.html
(Click to view the chart)
UP & COMERS PORTFOLIOS:
EXDS, TQNT, BVSN, SANM, PKI and GMST for now.
GMST (Gemstar-TV Guide Intl--$50.56; -1.13; optionable (GST)): Consumer Durables: Electronic Equipment
STATUS: Closed just under the 50 day MVA (50.63), dropping below the 10 day MVA (51.52) where we wanted to see support hold the stock. Nevertheless, the candlestick chart shows a tight doji on lower volume (2.18 million; avg. 4.4 million), which suggests a move back up.
BUY POINT: Aggressive: On a move back up from the doji on rising volume.
POSITION: Aggressive: Stock and/or May $50 calls to buy (GST EJ).
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
A covered call or put play:
CHKP (Check Point Software Tech--$129.44; -9.87; optionable (KGE)): Computer Software & Services: Security Software & Services
STATUS: After holding together well at the start of the week, the stock sold down the last two days on increasing volume (7 million; avg. 5.4 million). CHKP dropped below the 200 day MVA (127.92) but recovered back over that level to close. Even so, CHKP looks like it is heading down if it breaks the support level again. On that move, we will look at covered calls (and/or puts) on the move down. The stock is scheduled to split Tuesday. On the break of support, let the stock move back up to test the break, then take positions on the move down. If the Nasdaq holds support, a move down can be short-lived, so this is an aggressive play.
BUY POINT: Aggressive: Let the stock break below 127.92 (50 day MVA), then move back up to test the breach of support. Entry point is on a move back down on strong, rising volume.
POSITION: March $125 calls to sell (KGE CG), and/or April $130 puts to buy (KGE PF).
http://www.investmenthouse.com/cd/chkp.html
(Click to view the chart)
EMLX (Emulex Corp--$77.50; +2.00; optionable (UEL)): Computer Hardware: Peripherals
STATUS: Found support and move up on slightly higher volume (7.2 million; avg. 5 million), a rare showing of excellent strength from one of the big boys on the Nasdaq. EMLX sold below its 50 day MVA (83.94) Wednesday and Thursday. Look for a move up from here, with possible resistance at the 50 day MVA. Again, EMLX is a stock that tends to move more quickly than other stocks when the market rallies (and vice versa), making it one of our favorite stocks to play.
BUY POINT: On a move up from here on continued rising volume.
POSITION: Stock and/or April $75 calls to buy (UEL DO).
http://www.investmenthouse.com/cd/emlx.html
(Click to view the chart)
VTSS (Vitesse Semiconductor--$62.13; -0.93; optionable (VQT)): Electronics: Semiconductor, Integrated Circuits
STATUS: Continues to hold in a more-or-less three-day lateral consolidation just under the 50 day MVA (63.27) as volume dropped again (5.4 million; avg. 6.4 million). The stock showed a doji, after hitting a high of 65.13 on a test of resistance at the 18 day MVA. 10 day MVA is just above that at 65.52. Price is holding above the down trendline (connecting August and November highs), and as long as volume remains low, can hold this support until the market rallies price back up. Good buying.
BUY POINT: Aggressive: Up from here on stronger 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)
BRCM (Broadcom Corp--$77.19; -1.69; optionable (RDZ)): Electronics: Semiconductor, Integrated Circuits
STATUS: Showing a doji after the 8-day fall, volume Friday dropping back below average to 12.8 million (avg. 13.4 million). The 10 day MVA is well ahead at 93.36. BRCM looks ready to make a turn back up, and if the Nasdaq finds a bottom soon, we are looking for an eventual run back up to the 125 level.
BUY POINT: Aggressive: On a move up from here on stronger volume.
POSITION: Stock and/or May $75 calls to buy (RDZ EO).
http://www.investmenthouse.com/cd/brcm.html
(Click to view the chart)
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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