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SUBSCRIBER QUESTIONS

Q: There are a lot of stocks hitting the 9-11 lows (i.e. BRCM, GNSS, RIMM etc). Could this act as support and spike a short term rally even in this downtrending market? How do you approach these "double bottom" patterns?

A: One thing to consider: trends tend to stay in force until broken. Many of the stocks that were frontrunners to the downside did not find support these levels (e.g., QCOM). The indexes themselves are having a hard time finding support at these levels. There was a bounce, but now they are seeking them again. The NDX (Nasdaq 100) led the plunge, and it just failed at attempting to recapture that ground lose last week; it showed a doji Friday and was off sharply today. There is a lot of talk of a summer rally, and much of that appears to be related to the proximity of the September lows, the recent sharp selling, and the fact that it is summer and there is always hope of a summer rally. It may occur, but it has to show itself with a follow through here after yet another reversal off of fresh lows last Wednesday. We always let the market show us what to do, and we put a lot of weight on trends. The trend has not been broken yet even with this attempt at a bounce at the September lows. As noted in previous reports, we are cautious at this point but still playing the trend that continues to show the same action again and again. That will be interrupted by periodic rally attempts, and given the settings outlined above, that is why we are cautious. Still, we will take advantage of trend indicators when they appear as they did Friday even as we note there is the possibility of a summer bounce.

TEAM TRADES

OEX: With the indexes hitting resistance and showing doji's on Friday, we were looking at some index puts this week to catch the ride lower when it turned. Well, it did not take long to start selling once things got going Monday. About a half hour into trading the OEX hit our buy point at 488.95. We were not going to wait around long; reason: the ISM came out and it was up, but the market was not reacting positively to it. When a market gets good news and does not even try to rally, it is very sluggish to the upside, and that means the easiest course of action is to the downside. We were looking at August $90 puts. They were still pricey (around 18.30) for the delta (-45), but if the OEX made the 15 to 20 point fall we are looking for, that would not be a real problem. By the time we got the alert issued and got back to placing an order, the options were asking 18.40. We put in a limit order at the ask. That was missed on the downturn but the index bounced up and the fill made. A further rally to the upside turned over at the 15 minute MVA (that would have been the best entry point) and rode down that line the rest of the session with just a minor hiccup to test the line for an hour in the early afternoon. It then rolled over and really plunged lower.

THE PLAYS:

Good movers: GILD; ACN; CEPH; FRX

Monday plays:
TEN: Continued the move, but showed a doji.
OEX: Tanked as expected.
TKTX: Tanked as well.
UPSI: Rolled over hard, never hitting the buy point; looking at it the other way now.

Best Plays:
1) IVGN: Ready to fall.
2) USPI: Reversed on us.
3) Continuing stocks shaping up: ELK; CNI

New Plays

Upside:

PHLY (Philadelphia Consolidated--$45.15; -0.19; no options): Property & casualty insurance
http://biz.yahoo.com/p/p/phly.html
STATUS: Test breakout. Testing the breakout of a 10-week cup pattern, rallying to a high of 48 before turning back for this test. It is holding right at the 10 day MVA (45.20), rising Monday on stronger volume. Accumulation is excellent in since mid-April at 6 accumulation weeks to one distribution week. Insurance is one of the sectors that is holding up and moving up.
Volume: 175.1K Avg Volume: 86.454K
BUY POINT: $46.25 Volume=145K Target=$52.25 Stop=$42.50
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cd/phly.html

Downside:

IVGN (Invitrogen--$28.83; -3.18; optionable): Biotechnology
http://biz.yahoo.com/p/i/ivgn.html
STATUS: Put. Biotechs continue to struggle, and IVGN Monday broke below the lows of its trading range since March, also the level of its lows in the lat half of 1999. The breakdown on rising, above average volume indicates more downside to come. Money flow is tanking, and distribution leads accumulation during this trading range.
Volume: 1.636M Avg Volume: 1.092M
BUY POINT: $28.65 Volume=1.6M Target=$23.55 Stop=$32.55
POSITION: IUV TG - Aug. $35 p (-77 delta)
http://www.investmenthouse.com/cd/ivgn.html

USPI (United Surgical--$27.55; -3.43; optionable): Health services
http://biz.yahoo.com/p/u/uspi.html
STATUS: We are turning this one over. After what looked like a promising bounce from the 50 day MVA Friday on strong volume, USPI turned lower and tanked on above average volume Monday. Friday volume was massive, but it turned out to be masking some selling on the slight Friday gain. The crash below the 50 day MVA is a problem a lot of health services stocks are suffering after strong runs that ran out of steam, making highs on lower volume. The pattern is now a short head and shoulders, and we are looking to take what the market gives with a downside play on this reversal.
Volume: 449.2K Avg Volume: 378.818K
BUY POINT: $27.19 Volume=400K Target=$23.05 Stop=$25.29
POSITION: QPJ TF - Aug. $30 put (-80 delta)
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. We are still compiling the additional votes coming in.

EBAY, HOTT; LOW, NOC, PG, QLGC, RCII, SRCL, WM

Not a strong session for the portfolio as the larger stocks sold back. WM and LOW held up, but are not in buying positions at this point.

SRCL showed a massive doji on the 50 day MVA, but volume did not rise up on the session. Rising volume shows institutions stepping in to support the stock or buy it at this natural support level. It can still hold, but we would have preferred to see volume swell at this level. Now we have to watch and see how it performs here.

We are looking at a breakdown in PG as it struggles again after the attempted recovery last week. On a move below 89 on rising volume it can give a move down to 84. Positions: PG TS - Aug. $95 put (-67 delta) or PG TT - Aug. $100 put (-94 delta).

Stock Date Play Close +/- Pivot Tgt Vol AvgV Stop
$OEX 06/29 Put 23.08 -0.39 488.95 473 149K 0 502

ABCW 06/20 A Wedge 24.21 +0.1 23.35 27.55 172K 50K 21.65
Another rise on strong volume but not much headway in today's selling.

ACN 05/11 Put 16.75 -2.25 19.7 15.65 5.8M 3.3M 21.30
Falling like a stone now on strong volume.

AVY 06/22 Put 62.61 -0.14 63.49 59 422K 407K 66
Another doji on lower volume. May stall out here as it is not giving us the push down. If it does not break 62 on the close tomorrow we will look to exit.

AXP 05/08 cup hdl 37.11 +0.79 43.53 52 5.5M 4.9M 40.48

BLI 06/11 Test BO 19.02 -0.66 18.5 22 1.4M 665K 17.30
Testing back lower, but a lot more volume than you want on a test. Held the 10 day MVA, but may try 18.50.

BWA 06/08 Put 58.78 +1.02 59.99 55 458K 348K 63
Rallied to the 18 day MVA. Too high for us.

BZH 06/18 Put 79.52 -0.48 75.95 72 366K 521K 81
Holding at the 50 day MVA on no volume. Not falling with the market. May be time to get on out if it does not sell Tuesday or Wednesday.

BZH 06/03 Put 79.52 -0.48 74.45 70.45 366K 521K 77

CEPH 06/25 Put 41.56 -3.64 43.2 38 2.5M 2.2M 49.50
Tanking on slightly higher volume.

CHGO 05/28 Test 18 9.71 -0.27 7.75 10 390K 291K 7.21
Tested back on low volume. Good action in the selling market.

CHGO 05/09 Test 50 9.71 -0.27 7.3 10 390K 291K 7.02

CLF 05/15 Test BO 27.37 -0.23 28.2 34 88K 82K 26.90

CNI 06/26 cup hdl 52 +0.2 52.9 63.25 324K 433K 49.55
Doji, holding up well on weak volume.

CNTE 06/27 cup hdl 28.67 -2.31 30.2 36.25 107K 138K 28.09
Moved right back down on very low volume, giving back two good session moves. Held at the 10 day MVA, but disappointing.

COH 06/03 Put 52.7 -2.2 49.65 45 410K 516K 52
Moving down again, giving us a better exit point. We will see if it will fall further, but if it gets to 50 and holds we will exit and take what we can.

DESI 05/29 Test 18 6.2 -0.56 7.25 11 122K 134K 6.74
Not good, selling below the 50 day MVA on rising volume. Exit.

DGX 01/31 cup hdl 80.6 -5.45 68.9 100 2.8M 1M 84
Plummeting on very strong volume.

DLTR 05/09 Flat 37.06 -2.35 38.95 33 1.6M 1.2M 36.22
Reversed and tanked to the recent support at 37.

DROOY 05/21 A Wedge 4.1 -0.15 4.85 7 7.7M 4.5M 4.30
Caught some support at 4 once again on some strong volume. Good.

ELK 06/01 DB hdl 27.93 +0.58 27.46 34.96 92K 101K 24.95
Not a bad move in the handle in the bad market.

ENC 05/06 Rv H&S 8.89 +0.15 7.3 9.5 41K 36K 6.79
Nice bounce back up, but showing a doji at the hold high.

EXAS 06/15 cup hdl 15.18 -0.79 15.3 18.5 152K 128K 12
Testing lower, holding above the critical level at 15.

FDP 06/26 Test 18 25.15 +0.15 27.1 32.5 339K 260K 25.25
Holding at the 50 day MVA. Decent but that is about it.

FDP 05/21 A Wedge 25.15 +0.15 24.75 29.7 339K 260K 23.02

FHCC 06/11 cup hdl 26.99 -1.05 29.85 36 900K 941K 27.76
Plunging lower below the 50 day MVA. Poor action but may try to hold at 27 where it has held during this pattern. If it undercuts we are out.

FORG 06/15 Test BO 4.9 -0.1 5.15 6.85 96K 148K 4.20
Holding up well on low volume.

FRX 06/10 Put 68.67 -2.13 72.45 68 1.2M 1.3M 75
Tanking.

GILD 06/15 Put 30.17 -2.71 32.49 28.25 5.3M 3.5M 34.50
Tanking as well on big volume.

HARB 06/22 BO 24.4 +3.59 24.11 29 189K 48K 21.75
Incredible recovery, but we will take it.

HLT 05/06 Put 13.59 -0.31 14.3 12 2M 1.9M 15.80
Just will not give it up. Needs to fall Tuesday or Wednesday or we exit.

HLYW 05/29 Test 18 20.1 -0.58 19.25 27 653K 734K 17.9
Rolled over after again trying to make a breakout. Volume was very low, however, and it held the 10 day MVA on the close.

HOTT 06/12 Test BO 25.65 -1.06 27.05 32 467K 705K 24.64
Rolled right back down, giving back the move off the 50 day MVA last week. Volume was lower, the lone positive.

HOTT 05/29 Test BO 25.65 -1.06 26.5 32 467K 705K 24.64

IMH 03/26 A Wedge 12.18 -1.3 8.95 11.2 1M 430K 9.50
Crapped out on us, but still above the target point for remaining positions.

IVGN 07/01 Put 28.83 -3.18 28.65 23.55 1.6M 1.1M 32.55

KMI 06/19 Put 38.3 +0.28 40.75 37 1.6M 687K 43.25
Holding tough at 38, just above the target. Showed a doji on rising volume Monday, indicating it may try to test the 10 day MVA at 39.50. On weakness Tuesday, if any, we will look at taking some of the gain off the table.

KMI 05/25 Put 38.3 +0.28 44.75 40.25 1.6M 687K 41.62

LBIX 05/06 Flat 2.9 -0.3 1.95 3.5 114K 116K 1.58
Running out of some steam, but on very low volume.

LLL 06/10 Put 52.18 -1.82 59.1 54 1.5M 1.4M 62.50
Down to the 200 day MVA again.

LTR 06/15 Put 53.23 +0.24 54.95 50.25 665K 483K 57
Doji at 53. May try a bounce on us again.

MBAY 06/25 Dbl btm 4.6 -0.2 5.25 8 104K 162K 4.45

NCC 04/30 cup hdl 32.76 -0.49 31.42 37.25 1.4M 1.1M 29.75
Pulled back but on lighter volume. Holding up in the pattern.

NCOG 06/22 Put 21.32 -0.46 21.3 18.04 162K 217K 24
Turned over at he 200 day MVA but very low volume.

NVLS 06/27 Put 32.13 -1.87 34.95 29.75 7.9M 9.3M 38
Dropping as expected, but on low volume.

NWRE 06/26 cup hdl 11.8 +0.46 11.2 13.55 295K 154K 10.35
Not a bad move in a terrible market today.

ORB 06/04 cup hdl 7.53 -0.44 8.02 11.94 333K 340K 7.25
Gave it back but on lower volume. Still holding up.

PEET 06/18 A Wedge 16.68 -1.73 18.35 22 291K 240K 16.75
Back to the 50 day MVA on lower but above average volume. PEET is volatile, and it is trying to shake us out again. We want it to hold above 16.50 on the close.

PHLY 07/01 Test BO 45.15 -0.19 46.25 52.25 175K 86K 42.50

PTSI 06/24 Flat 24.93 +0.91 26.65 31.98 126K 62K 24.20
Tanked on us on strong volume. This is one we held off issuing an alert on Friday as we did not like the action.

RE 06/11 Put 54.84 -1.11 58.55 54 345K 576K 63
After trying to bounce Friday, RE turned back lower.

RITA 05/28 Cup 9.8 -0.32 10.1 13.9 136K 109K 9.39
Gave the move back, but on lower volume and still looking good.

SAM 06/12 cup hdl 15.9 0 16.85 20.5 46K 36K 15.45
Still hugging the 50 day MVA in a very flat consolidation.

SIE 06/11 Test 18 21.8 -0.55 21.1 25.45 231K 255K 19.62
Very low volume pullback on below average volume. Looks solid.

SNIC 05/30 A Wedge 8.07 +0.12 8.2 11 310K 314K 6.95
Moving up off of the 50 day MVA, but not with any power.

SNS 04/12 Test BO 14.85 -0.8 14.8 18 102K 109K 13.76
Reversed the move, right back to the 18 day MVA. At least on lower volume.

SNS 04/10 Dbl btm 14.85 -0.8 14.65 18 102K 109K 13.76

SRCL 06/22 Test BO 35.5 +0.09 38.5 45 547K 339K 35.8

STT 05/20 Put 44.1 -0.6 47.35 42.5 2.2M 1.5M 51.50
Turned at the 18 day MVA on rising volume. May make the move back down. If it gets near 43 or lower and looks to bounce, we will exit.

TEN 06/29 BO 6.87 +0.27 6.71 9.35 858K 188K 6.24
Bounced on up, but hard to play as it gapped up. We will let it test 6.50, hold and start back up.

TKTX 06/29 Put 33.59 -2.46 35.31 31.25 310K 409K 32.84

TSN 05/22 Test BO 15.18 -0.33 15.15 18 1.2M 991K 14.50
Pulled back on lower volume, holding the 18 day MVA and 10 day MVA on the close.

TSN 05/11 Test BO 15.18 -0.33 14.5 17.5 1.2M 991K 13.48

UNP 06/22 Cup 64.61 +1.33 64.9 73 1.3M 1.2M 60.36
Continuing the pretty amazing recovery up to the prior highs on above average volume.

UNP 06/12 Cup 64.61 +1.33 64.08 73 1.3M 1.2M 61

USPH 06/19 cup hdl 19.9 -0.41 20.05 25 88K 103K 18.65
Holding up well on low volume.

USPI 07/01 Put 27.55 -3.43 27.19 23.05 449K 379K 25.29

WMT 06/17 DB hdl 54.4 -0.61 59.4 73 10M 8.2M 55.24
Never gave the buy and is tanking again, disrupting the pattern.

WTW 05/23 Test BO 42.3 -1.14 43.7 50 864K 262K 40.64
Gave back some of the moved on lower volume.

WYE 06/24 Put 49.94 -1.26 53.25 49.15 3.6M 4.1M 55
Tanking hard on lower volume. It will have some trouble at 50 given the low volume. If there is weakness tomorrow and it turns before the target, we will look at existing.

YCC 06/27 Test BO 26 -1.09 27.3 32.75 209K 402K 25
Shaking out? Below the 10 day MVA but on very low volume.

ZNT 05/23 A Wedge 31.07 -0.78 31.6 37.94 40K 38K 30
Giving up the 50 day MVA on lower volume, but holding at potential support at 31. Needs to hold here.

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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