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Begin Part 2 of 2
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:
Good movers: ABCW; ORB; CHGO; CNTE; SNS;
Friday plays:
CNTE: Strong breakout move on strong volume.
YCC: Better volume, but did not hit the buy point yet.
NVLS: Rolled over with a doji as expected.
Best Plays:
1) TEN: Good breakout move in progress.
2) $OEX: Ready to fall.
3) TKTX: Looks ready to roll back down.
4) Continuing stocks shaping up: DLTR; ENC
New Plays
Upside:
TEN (Tenneco Automotive--$6.17; +0.31; no options): Auto Parts
http://biz.yahoo.com/p/t/ten.html
STATUS: Ascending wedge. A new issue in late 1999, TEN caught the market top and sold down with the rest of the market. Starting in August 2001 it formed a cup with handle and broke out of the base in April. It rallied to a high at 6.50 and has since formed the next consolidation, the current ascending wedge. Accumulation weeks in the current base lead 3 to 1 over distribution weeks. That is good accumulation in the pattern. Friday the stock make a breakout move from the pattern on massive volume. Relative strength broke out on the move.
Volume: 302.8K Avg Volume: 162.5K
BUY POINT: $6.71 Volume=250K Target=$9.35 Stop=$6.24
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cd/ten.html
Downside
$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. $490p (-45 delta), 37% gain if target hit.
http://www.investmenthouse.com/ct/$oex.html
TKTX (Transkaryotic Therapies--$36.05; -0.37; optionable): Biotechnology
http://biz.yahoo.com/p/t/tktx.html
STATUS: Put. TKTX has been trading in a range between 32 and 37 this month. Friday it rallied to 39.23 on the intraday high and then collapsed back down on rising, slightly above average volume. Money flow is very weak, and the rollover after attempting to cross the 200 day MVA looks like another fall is coming.
Volume: 457.2K Avg Volume: 408.863K
BUY POINT: $35.31 Volume=5M Target=$32.25 Stop=$37.75
POSITION: UFT TH - Aug. $40p (-74 delta), 35% gain if it hits the target
http://www.investmenthouse.com/cd/tktx.html
Revisited:
USPI (United Surgical--$30.98; +1.22; optionable): Health services
http://biz.yahoo.com/p/u/uspi.html
STATUS: 50 day MVA bounce. USPI broke out of a cup with handle base in late April. It rallied up to 34 , a nice $8 run. After that peak it was ready to take a breather, and it has come back to test the 50 day MVA (28.65) the pat 5 sessions. Friday it tapped at that level once again and then rallied over the 10 and 18 day MVA on some tremendous volume. While some of this was no doubt due to the quarter end shuffling, we like those bounces off the 50 day MVA on strong volume. We need to see continued solid volume on a continued move up.
Volume: 1.399M Avg Volume: 378.818K
BUY POINT: $31.25 Volume=568K Target=$37 Stop=$27.75
POSITION: QPJ KE - Nov. $25c (79 delta) and/or stock.
http://www.investmenthouse.com/cd/uspi.html
PORTFOLIOS: Due to subscriber requests, we are merging the portfolios into one Member Portfolio controlled by the subscribers with periodic surveys on the stocks desired. We had a big response over the weekend and will be putting the new Member Portfolio together soon. If you have not done so, get your choices in now.
MEMBER PORTFOLIO: We have tallied most of the votes, and the following are the current leaders.
EBAY, HOTT; LOW, NOC, PG, QLGC, RCII, SRCL, WM
Continuing plays:
Stock Date Play Close +/- Pivot Tgt Vol AvgV Stop
$OEX 06/29 Put 46.94 -0.06 488.95 473 94K 0 502
ABCW 06/20 A Wedge 24.11 +1.75 23.35 27.55 445K 50K 21.65
Powerful breakout move Friday, exploding from the 50 day MVA on massive volume.
ACN 05/11 Put 19 +0.18 19.7 15.65 1.6M 3.3M 21.30
A doji at the 10 day MVA. Once again looks ready to fall.
AVY 06/22 Put 62.75 -0.19 63.49 59 670K 407K 66
Falling but showing a doji on the session. 62 is acting as resistance. If it tests it again and it holds, we will exit.
AXP 05/08 cup hdl 36.32 -0.76 43.53 52 13M 4.9M 40.48
BLI 06/11 Test BO 19.68 +0.28 18.5 22 1.3M 665K 17.30
Gapped higher Friday and managed to hold most of the gain. Still in good shape, should hold 19 on any test.
BLL 06/06 Put 41.48 +0.23 41.54 38 1.9M 498K 44
Massive volume Friday as it tested 42 again and held its ground with a doji. Need to close this one out.
BWA 06/08 Put 57.76 +1.36 59.99 55 915K 348K 63
Held above 55 on the low late last week and jumped Friday on some strong volume. It traded over the 10 day MVA intraday but closed below it. We won't let it go any higher.
BZH 06/18 Put 80 +0.3 75.95 72 497K 521K 81
Another doji at the 50 day MVA on low volume. Looks ready to fall back.
BZH 06/03 Put 80 +0.3 74.45 70.45 497K 521K 77
CBSH 06/18 BO 44.24 +0.05 46.67 56 435K 128K 43.85
Last test of the 50 day MVA on Friday. Time to exit.
CEPH 06/25 Put 45.2 +0.85 43.2 38 2.5M 2.2M 49.50
A doji at the 10 day MVA on Friday. Ready to fall again in the continued downtrend.
CHGO 05/28 Test 18 9.98 +0.78 7.75 10 1.3M 291K 7.21
Hit the target Friday on massive volume.
CHGO 05/09 Test 50 9.98 +0.78 7.3 10 1.3M 291K 7.02
CLF 05/15 Test BO 27.6 +0.61 28.2 34 94K 82K 26.90
Not a bad recovery above the simple 50 day MVA on some above average volume.
CNI 06/26 cup hdl 51.8 -0.7 52.9 63.25 787K 433K 49.55
Got cold feet on the breakout attempt, falling back to negative on above average volume.
CNTE 06/27 cup hdl 30.98 +1.13 30.2 36.25 509K 138K 28.09
Strong move on much stronger volume.
COH 06/03 Put 54.9 -0.2 49.65 45 564K 516K 52
Doji on low volume at the 50 day MVA. May get one more chance to sell early this week.
DESI 05/29 Test 18 6.76 +0.14 7.25 11 45K 134K 6.74
Holding the 50 day MVA as it forms a new base.
DGX 01/31 cup hdl 86.05 +1.95 68.9 100 1.3M 1M 84
Holding at some support at 85 but struggling.
DLTR 05/09 Flat 39.41 +1.6 38.95 33 1.7M 1.2M 36.22
Solid move off the 50 day MVA on rising, above average volume.
DROOY 05/21 A Wedge 4.25 -0.05 4.85 7 3.6M 4.5M 4.30
Back below the 50 day MVA. Gold is as volatile as the March wind right now.
ELK 06/01 DB hdl 27.35 -0.81 27.46 34.96 290K 101K 24.95
Falling back on rising volume. Still in the pattern.
ENC 05/06 Rv H&S 8.74 +0.24 7.3 9.5 46K 36K 6.79
Nice, higher volume bounce up off of the 18 day MVA.
EXAS 06/15 cup hdl 15.97 -0.61 15.3 18.5 1.1M 128K 12
Pulled back after the breakout Friday. No problem but on massive volume. Needs to hold at 15.
FDP 06/26 Test 18 25 +0.09 27.1 32.5 290K 260K 25.25
Held the 50 day MVA for now.
FDP 05/21 A Wedge 25 +0.09 24.75 29.7 290K 260K 23.02
FHCC 06/11 cup hdl 28.04 +0.51 29.85 36 808K 941K 27.76
Recovering in the handle, but too deep of a dip. Resistance at 28.25; needs to clear that.
FORG 06/15 Test BO 5 -0.02 5.15 6.85 115K 148K 4.20
A doji at the 10 day MVA on low volume once again. Holding up well.
FRX 06/10 Put 70.8 -0.23 72.45 68 1.4M 1.3M 75
Tried to clear the 18 day MVA, but failed, showing a doji at the 10 day MVA. Looks ready to fall again.
GILD 06/15 Put 32.88 +0.4 32.49 28.25 3.8M 3.5M 34.50
Tapped the 50 day MVA on the high and fell back below the 200 day MVA. If does not fall early this week we will exit.
HARB 06/22 BO 20.81 -3.23 24.11 29 288K 48K 21.75
Massive tank. May get a rebound to the 50 day MVA at 22.25. Any bounce will be a better exit point.
HLT 05/06 Put 13.9 +0.34 14.3 12 2.6M 1.9M 15.80
Just won't give it up, moving laterally under the 10 day MVA. If we get some weakness or if it goes nowhere we are going to exit.
HLYW 05/29 Test 18 20.68 +0.28 19.25 27 1.6M 734K 17.9
Tried to make the strong move Friday on excellent volume, but could not hold the break to the new high.
HOTT 06/12 Test BO 26.71 +0.47 27.05 32 1.1M 705K 24.64
Strong volume as well but it too backed off the high on the close.
HOTT 05/29 Test BO 26.71 +0.47 26.5 32 1.1M 705K 24.64
IMH 03/26 A Wedge 13.48 +0.38 8.95 11.2 2.3M 430K 9.50
Powering higher on massive volume.
KMI 06/19 Put 38.02 -0.58 40.75 37 1M 687K 43.25
Still working its way lower.
KMI 05/25 Put 38.02 -0.58 44.75 40.25 1M 687K 41.62
LBIX 05/06 Flat 3.2 +0.1 1.95 3.5 197K 116K 1.58
Another gain but closed well off of the high on lower volume. May be ready for a breather that could test steeply given the ballistic rise.
LLL 06/10 Put 54 -0.9 59.1 54 3.4M 1.4M 62.50
Tapped the 10 day MVA and ready to fall again.
LTR 06/15 Put 52.99 -1.56 54.95 50.25 695K 483K 57
Falling again after a feeble attempt to rally.
MBAY 06/25 Dbl btm 4.8 +0.19 5.25 8 75K 162K 4.45
Holding the 50 day MVA. Has yet to hit the buy point.
NCC 04/30 cup hdl 33.25 +0.59 31.42 37.25 1.8M 1.1M 29.75
Solid move on continued solid volume after the test of the 50 day MVA.
NCOG 06/22 Put 21.78 -0.36 21.3 18.04 555K 217K 24
Ready to roll back down after a doji at the 18 day MVA Friday and rolling over on some massive volume.
NVLS 06/27 Put 34 -0.77 34.95 29.75 9.7M 9.3M 38
Starting down as anticipated with a doji at the 10 day MVA.
NWRE 06/26 cup hdl 11.34 -0.36 11.2 13.55 242K 154K 10.35
A slight pullback on lower volume after the big gain.
ORB 06/04 cup hdl 7.97 +0.42 8.02 11.94 1.2M 340K 7.25
Big breakout on strong volume.
PEET 06/18 A Wedge 18.41 -0.48 18.35 22 890K 240K 16.75
Tried another push higher but then reversed on sharply higher voume. Still holding up.
PTSI 06/24 Flat 24.02 -2.83 26.65 31.98 364K 62K 24.20
Danger. Immediate reversal of the breakout attempt. We are looking to exit on a test of 25 if we get it. No point in taking chances on a breakout that reverses quickly.
RE 06/11 Put 55.95 -0.11 58.55 54 850K 576K 63
Close to the target Friday, managing to rebound on some stronger volume but closing well off the session high. On another test down to 54.50 early in the week we will look at closing the position.
RITA 05/28 Cup 10.12 +0.4 10.1 13.9 668K 109K 9.39
Solid move on massive volume Friday.
SAM 06/12 cup hdl 15.9 -0.09 16.85 20.5 90K 36K 15.45
SIE 06/11 Test 18 22.35 +0.32 21.1 25.45 867K 255K 19.62
Moving up again on some very strong volume.
SNIC 05/30 A Wedge 7.94 +0.15 8.2 11 227K 314K 6.95
Testing the 50 day MVA still on very light volume.
SNS 04/12 Test BO 15.65 +0.9 14.8 18 265K 109K 13.76
Great recovery on some very strong volume Friday.
SNS 04/10 Dbl btm 15.65 +0.9 14.65 18 265K 109K 13.76
SRCL 06/22 Test BO 35.41 -0.35 38.5 45 830K 339K 35.8
Still testing the 50 day MVA, showing a doji on rising volume.
STT 05/20 Put 44.7 +0.3 47.35 42.5 2.2M 1.5M 51.50
Crawled over the 18 day MVA on continued strong volume. Need to close it out if it does not fall back early this week.
TEN 06/29 BO 6.17 +0.31 6.71 9.35 303K 162K 6.24
TKTX 06/29 Put 36.05 -0.37 35.31 32.25 457K 409K 37.75
TSN 05/22 Test BO 15.51 -0.04 15.15 18 2.2M 991K 14.50
Big volume but no gain. Churning at the recent high of 15.50. May test 15 again, but that leaves somewhat of a double top.
TSN 05/11 Test BO 15.51 -0.04 14.5 17.5 2.2M 991K 13.48
UNP 06/22 Cup 63.28 +1.1 64.9 73 1.2M 1.2M 60.36
Fighting back. We will see if it performs.
USPH 06/19 cup hdl 20.31 +0.24 20.05 25 449K 103K 18.65
Still moving higher on stronger volume. Better action.
USPH 06/08 Flat 20.31 +0.24 19.1 24.85 449K 103K 17.25
USPI 06/29 Test 50 30.98 +1.22 31.25 37 1.4M 379K 27.75
WMT 06/17 DB hdl 55.01 -2.69 59.4 73 16M 8.2M 55.24
Just all over the map. The pattern has deteriorated.
WTW 05/23 Test BO 43.44 +1.19 43.7 50 1.8M 262K 40.64
Excellent recovery after dropping the plans for the new offering. Strong volume and now at the critical 44 level.
WYE 06/24 Put 51.2 -1.48 53.25 49.15 5M 4.1M 55
Tested the 18 day MVA and now falling once again. Looks like a drop back to 49 this time around.
YCC 06/27 Test BO 27.09 +0.17 27.3 32.75 601K 402K 25
Edged higher Friday, but did not make the buy point. Volume was better. This one is a stepper right now so we need to stay alert.
ZNT 05/23 A Wedge 31.85 +0.55 31.6 37.94 85K 38K 30
Nice recovery off the 50 day MVA on some very strong voume.
Good Investing!
Jon L. 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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