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us stock market, trade stock
Begin Part 2 of 3
Support and Resistance
Nasdaq: Closed at 1462.21
Resistance: The 10 day MVA (1470.36). After that 1500 and the 18 day MVA (1500.52) team up for resistance. Then the May low (1560.29) and the second March down trendline at 1555.
Support: There is some support at the interim low after the September bottom (1418). After that there is the March down trendline at 1410, teaming up with the long term up trendline from 1991 at 1400. The March downtrend bottom channel line at 1355. The September low at 1387.06. 1357.09 is the October 1998 bear market low.
S&P 500: Closed at 989.82
Resistance: The September 2000/May 2001 down trendline and 10 day MVA are also coincident at 997. The 10 day MVA (997.24). Then the March down trendline is at 1003, backed up immediately by the 18 day MVA at 1011.01. The second March down trendline at 1036. The May low at 1048.96. 1060 offers minor resistance from previous prices. Then the February lows at 1074.
Support: The bottom channel of the March down trendline (974). The September closing low is 965.80 and the intraday low is 944.75. 923.32 is the October 1998 bear market low.
Dow: Closed at 9243.26
Resistance: 9250 represents some resistance from some intraday and closing prices. The 10 day MVA (9331.76) and the March down trendline at 9335. After that is the 18 day MVA at 9458.77, followed by price resistance at 9500. Then 9750 and the April and May lows at 9800 to 9811. The 50 day MVA (9751.31) is at price point resistance at 9750. Then the 200 day MVA (9816.01). The September 2000/February 2001 down trendline is at roughly 9900. Then 10,100, followed by 10,250 to 10,300.
Support: 9100 from the October 2001 consolidation after the move off of the September low. 9000 is the November low off of the first rally from the September low. The bottom channel of the March downtrend at 9020. There is a rest stop at 8500. The September closing low is 8235.81 and the intraday low is 8062.
Economic Calendar
7-01-02
Auto sales, June: 6.1M expected, 5.7M prior.
Truck sales, June: 7.2M expected, 6.8M prior.
ISM, June (10:00): 55.5 expected, 55.7 prior.
Construction spending, May (10:00): 0.3% expected, 0.2% prior.
7-03-02
Initial jobless claims (8:30): 385K expected, 388K prior.
ISM services, June (10:00): 58.2 expected, 60.1 prior.
Factory orders, May (10:00): 0.6% expected, 0.4% prior.
7-05-02
Non-farm payrolls, June (8:30): 60K exected, 41K prior.
Unemployment, June (8:30): 5.9% expected, 5.8% prior.
Average workweek, June, (8:30): 34.3 expected, 34.2 prior.
Hourly earnings, June (8:30): 0.3% expected, 0.2% prior.
SUBSCRIBER QUESTIONS
Q: I have limited online access during exchange hours (I work!). I am considering using stock contingency orders for options. What is your opinion of this? Love the Daily.
A: Stock contingency orders with respect ot options means that you place an order to sell your options when the underlying stock hits a certain price. This is opposed to setting s top on the option itself. There are advantages. First, in thinly traded options (less than 100 open interests is our usualy cutoff point, but very liquid options have over a thousand open interests) stop losses do not work as well. You have the problem of market maker manipulation as well as not having the order triggered until there is a trade at your stop price. If the option is not liquid, i.e., there are not a lot of trades in the option, your stop could be passed over. If it is a stop loss, the next lower trade would trigger the stop; with a stop limit, it would not be triggered until there is a trade at your price. Second, you don't have to chance an incorrect stop point based on the delta. While you can be pretty accurate in calculating an option's price based on the delta when the stock hits a certain price point, you might be a bit off. If you do not allow for this and move your stop order inside where you think the price should be when the stock makes the targeted move, you could be close but not get the execution. The stock could rebound on you and you miss your sell point. Given that sometimes a stock itself turns a bit ahead of where it was anticipated to fall, you can see how you could miss out on an execution at times.
In summary, using contingency orders based on the stock price for options has advantages. You have to have a broker that allows you to do this, however. More do it now so that is not as much of a problem.
THE PLAYS:
We are keeping the plays to the best of the best and have all plays listed in the summary table to make it easy to follow the action for each session as well as our comments on the action. Our goal is get you onto the best plays and to have a report that is very functional for you to use.
Good movers: BPOP; COCO; HUG; JILL; KSWS; PII; ADS
BONUS PLAYS:
Upside:
COL (Rockwell-Collins--$24.60; -0.21; optionable): Defense
http://biz.yahoo.com/p/c/col.html
STATUS: Cup w/handle. Defense continues to be a hot sector, and after a correction the past two months, it looks ready to move back up. COL was a new issue last June. It corrected back immediately, building a cup w/handle base that led to a breakout in early May. Then it corrected back immediately with the rest of the market, forming the current 2-month cup w/handle base. Volume has been excellent the past two weeks, surging in anticipation of the breakout. The accumulation weeks in the short base is 3 up to 1 down. Very solid accumulation on excellent volume with two recent volume spikes on up sessions. Money flow is excellent and relative strength is already breaking out.
Volume: 615.6K Avg Volume: 452.909K
BUY POINT: $27.75 Volume=680K Target=$33.45 Stop=$24.85
POSITION: COL JX - Oct. $22.50c (85 delta) and/or stock
http://www.investmenthouse.com/cs/col.html
Downside:
C (Citigroup--$38.75; -0.41; optionable): Sandy Weil
http://biz.yahoo.com/p/c/c.html
STATUS: Continuing downtrend. C is in a continuing downtrend, rallying up over the past three session to tap toward the 18 day MVA (40.54) and then reverse to close lower. Volume on the move back up Thursday and Friday lagged the prior selling volume; that is the classic pattern of a continuing downtrend. We are looking for C to fall and give us some downside action in the downtrend.
Volume: 20.871M Avg Volume: 13.92M
BUY POINT: $38.6 Volume=1.9M Target=$34.75 Stop=$41.15
POSITION: C TI - Aug. $45p (-80 delta), 47% gain if it hits target.
http://www.investmenthouse.com/cs/c.html
JPM (JP Morgan--$33.92; +1.2; optionable): Money center bank
http://biz.yahoo.com/p/j/jpm.html
STATUS: Testing breach of 200 day MVA. JPM continues its tempestuous action around the 200 day MVA (35.23), but it is now decidedly below that level and trending lower. It bounced the last three sessions on lower volume. Friday it cracked over and closed above the 18 day MVA (33.75). Anticipating it will turn down here or at the 50 day MVA (35.64).
Volume: 8.071M Avg Volume: 7.874M
BUY POINT: On a turn down from here, a move below $33.20. Volume=9M Target=$33.12 Stop=$35.75
POSITION: JPM TU - Aug. $37.50p (-74 delta), 45% gain if hits target
http://www.investmenthouse.com/cs/jpm.html
$OEX (S&P 100 options--$490.12; -1.49; optionable):
http://biz.yahoo.com/p/$/$oex.html
STATUS: Put, continuing downtrend. The OEX touched down Wednesday and reversed, rallying Thursday and Friday with the market. Friday it showed that classic action, rallying above the 10 day MVA (494.70) and then reversed to close below that level on strong volume. A doji reversal at resistance on higher volume. This is a classic pattern in the continuing downtrend.
BUY POINT: $488.95. Target=$473 Stop=$502
POSITION: OXB TR - Aug. $490p (-45 delta), 37% gain if target hit.
http://www.investmenthouse.com/cs/$oex.html
NEW PRE-ANNOUNCEMENT
CHBS (Christopher Banks--$41.75; +0.66; optionable): Forecast to announce a split on 7-17-02 in conjunction with a board meeting or on 7-31-02 in conjunction with its annual shareholder meeting. The company will not confirm the board meeting date, but based upon our research this is the date for the meeting.
http://biz.yahoo.com/p/c/chbs.html
BACKGROUND: Last announced a 3 for 2 split on 11-14-01 in conjunction with a board meeting. The stock price was $38.76. The annual shareholder meeting is scheduled for 3:00 CT on 7-31-02 at which time no additional shares were authorized. The company has sufficient shares for a 3 for 2 split.
STATUS: Ascending wedge. CHBS is in a combination pattern, having broken out of a cup with handle in April and now in an ascending wedge riding up the 50 day MVA. Accumulation is good in the wedge at 3 accumulation weeks to 1 distribution week. Looking for a breakout of this base to take positions.
Volume: 200.3K Avg Volume: 404.09K
BUY POINT: $43.58 Volume=606K Target=$52.35 Stop=$39.50
POSITION: URH IG - Sept. $35c (81 delta) and/or stock
http://www.investmenthouse.com/cs/chbs.html
URBN (Urban Outfitters--$34.72; +0.97; optionable): Forecast to announce a split on 8-15-02 before the market opens in conjunction with earnings.
BACKGROUND: URBN last split its stock 2 for 1 in June 1996. At the time of the announcement the stock price was $35. The annual shareholder meeting was on 6-25-02 at which time no additional shares were authorized, but URBN has sufficient shares for a 2 for 1 split.
http://biz.yahoo.com/p/u/urbn.html
STATUS: The apparel sector continues to perform, and we are starting to see splits again in this sector along with some strong uptrends. URB broke out of a long, 27-month base in April and has been trending higher ever since. It has just bounced up off of a test of the 50 day MVA (31.89), a good entry point, but it did not generate a lot of volume on the move. We are going to let it test the 18 day MVA at 34 this week, and then look for a stronger volume move to take positions in this continuing uptrend.
Volume: 201K Avg Volume: 261.045K
BUY POINT: $35.55 Volume=395K Target=$42.75 Stop=$31.75
POSITION: URQ LF - Dec. $30c (72 delta) and/or stock.
http://www.investmenthouse.com/cs/urbn.html
PRE-ANNOUNCEMENT BEST PLAYS: HUG made the great move.
BBBY (Bed, Bath & Beyond--$37.74; +0.05; optionable): Forecast to announce a split on 7-11-02 in conjunction with a board meeting.
http://biz.yahoo.com/p/b/bbby.html
BACKGROUND: Last announced a 2 for 1 split on 7-13-00 in conjunction with a board meeting. The stock price was $39. Additional shares were authorized at the annual shareholder meeting on 6-28-01. The company thus has sufficient shares for a 2 for 1 split.
STATUS: Friday BBBY continued to move higher but it was a gap higher on some lower volume, showing a doji on the candlestick pattern at the end of the session. We are looking for a test of 37 now. We want to see it test, hold and start back up. At that point we will move in for new positions.
Volume: 3.815M Avg Volume: 3.277M
BUY POINT: After a test of 37, 37.50. Volume=4.8M Target=$45.45 Stop=$35.25
POSITION: BHQ KG - Nov. 35 call (70 delta) or BHQ KZ - Nov. 32.50 call (80 delta) and/or Stock
http://www.investmenthouse.com/cs/bbby.html
EDMC (Education Management--$40.73; -0.58; optionable): Researching a date for this split candidate, but the pattern has formed up well.
http://biz.yahoo.com/p/e/edmc.html
BACKGROUND: Last announced a 2 for 1 split on 12-2-98 in conjunction with a board meeting. The stock price was $47. The company has sufficient shares for a 2 for 1 split.
STATUS: Cup w/handle. Well, EDMC rallied toward a breakout from its 12-month cup with handle pattern, but the move up was pretty taxing all the way from the 200 day MVA. It showed some great volume on the move up and has pulled back on lower though still strong volume. Friday it showed a doji on the 50 day MVA on rising volume. We like to see volume rise on tests of the 50 day MVA as long as it bounces from that level. EDMC showed a doji after pulling back and that can mean a change of momentum. We can take aggressive positions off of this level and then on the breakout. Accumulation weeks outnumber distribution weeks 13 to 5 in the base.
Volume: 916.6K Avg Volume: 264.227K
BUY POINT: From here, $42.05. Volume=334K Target=$53 Stop=$39.50
POSITION: UKN LG - Dec. $35 call (Low OI) and/or stock.
http://www.investmenthouse.com/cs/edmc.html
PRE-SPLITS BEST PLAYS: Remember, we try to grab Pre-Splits as they break out of good patterns or as they start a run right before the split. Not looking for home runs, but looking for those $3 to $4 moves running into the split, watching for topping signs and potential resistance. Not huge money, but it can be very steady. We set our initial stops at the 7-8% range below the purchase price (or just below obvious support), and move them up on a move to preserve our profits.
Upside:
BER (W.R. Berkley--$55.00; +0.04; optionable): Splits 3:2 on 7-03-02.
http://biz.yahoo.com/p/b/ber.html
STATUS: BER has not been blowing anyone out of the water as its recent action has been volatile, running up from 54 to 60 and then right back down last week. It is just three sessions from the split, however, and on Friday it showed a tight doji on some massive volume. It looks as if it is ready to run back up from here ahead of its split. Looks ready to make us some money going into the split.
Volume: 588.2K Avg Volume: 141.545K
BUY POINT: $55.31 Volume=200K Target=$59.55 Stop=$53.50
POSITION: BER HJ - Aug. $50 c (88 delta, low OI). We are looking at options given the price and target right before the split.
http://www.investmenthouse.com/cs/ber.html
CMC (Commercial Metals--$46.94; -0.06; no options): Splits 2 for 1 on 7-1-02. It will split Monday, but again, we like this pullback, and economically sensitive stocks have moved well through their split dates.
http://biz.yahoo.com/p/c/cmc.html
STATUS: Testing the breakout. CMC broke out 5 sessions ago, rallied higher, and Friday again tested the 10 day MVA (46.75), showing another rising start doji above the 10 day. Has the look of a successful test. Even though it splits Monday, economically sensitive stocks (basic materials) are doing well post-split.
Volume: 75.6K Avg Volume: 54.909K
BUY POINT: $48.05 Volume=84K Target=$57 Stop=$44.69
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/cmc.html
JILL (J. Jill Group--$37.95; +1.8; optionable): Splits 3:2 on 7-01-02
http://biz.yahoo.com/p/j/jill.html
STATUS: Jill was a pre-split play for us already, running up for us from 34.80, Friday making a strong move on strong volume. As noted above, economically sensitive stocks are doing well post-split, and with the good move Friday, we are looking for JILL to continue the move post-split. Looking at more positions on continued strong volume.
Volume: 487.2K Avg Volume: 263.59K
BUY POINT: New positions at 25.37 (post split price). Volume=300K Target=$26.64 (for existing positions). 30.44 for new positions. Stop=$22.16
POSITION: JUI IF - Sept. $30 call (83 delta)
http://www.investmenthouse.com/cs/jill.html
CONTINUING CANDIDATES
KLAC (KLA Tencor--$43.99; -1.15; optionable): Chip equipment
http://biz.yahoo.com/p/k/klac.html
STATUS: Put. KLAC tapped at the 10 day MVA on the high Friday (45.95) and started the roll back down as we anticipated, showing a loose doji on the candlestick chart. This is the same action the stock has shown the prior sell offs. Looking for more positions on further selling this week.
Volume: 12.538M Avg Volume: 13.056M
BUY POINT: $44.95 Volume=15M Target=$41.5 Stop=$48
POSITION: KCQ TK - Aug. $55 put (-75 delta)
http://www.investmenthouse.com/cs/klac.html
POST-SPLITS BEST PLAYS:
Upside
PENN (Penn National Gaming--$18.15; +1.17; optionable):
http://biz.yahoo.com/p/p/penn.html
STATUS: PENN split Wednesday, and has already started back up, clearing the 50 day MVA Friday on some strong volume. PENN is showing what a lot of strong stocks have shown post-split in this market: the start of a run higher as buyers come back into the stock. It is more of a momentum play at this point as it comes off of a test of the 200 day MVA. It will probably run up to the hold high near 21. From there it could form a handle and then breakout.
Volume: 782.5K Avg Volume: 304.136K
BUY POINT: From here, $18.35. Volume=500K Target=$21 (initial). Stop=$17.07
POSITION: UQN JV - Oct. $12.50c (92 delta) and/or stock
http://www.investmenthouse.com/cs/penn.html
Downside
CUB (Cubic Corp.--$23.70; -0.30; optionable):
http://biz.yahoo.com/p/c/cub.html
STATUS: Put. Cub rallied to the 50 day MVA on the high Friday (25.57) and then turned over on high volume. We were watching it and it hit the buy point just seconds before the close. Volume was huge. It looks as if it going to continue to roll back down and we are going to jump on it this week as it continues the move. CUB just made us some money on its last fall, and it is looking to do it again.
Volume: 430.8K Avg Volume: 146.272K
BUY POINT: $23.65 Volume=180K Target=$20.25 Stop=$26
POSITION: CUB TF - Aug. $30 puts (-78 delta)
http://www.investmenthouse.com/cs/cub.html
End Part 2 of 3
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