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us stock market, trend trading stock
Begin Part 2 of 3
Support and Resistance
Nasdaq: Closed at 1373.50
Resistance: The May down trendline is still right there at 1373, followed by the September 2001 low at 1387. The 10 day MVA (1395.34) held the index back on the Friday high. Then 1418, the interim test after the September low, and the 18 day MVA (1426.12). 1500 and the May low (1560.29). The second March down trendline is at 1521. The 50 day MVA (1531.45).
Support: The March down trendline (1358). The July intraday lows may have some stability (1336) for a bounce back up in the downtrend. Then the March down trendline bottom channel line at 1308. 1357.09 is the October 1998 bear market low just for reference. After that is roughly 1250.
S&P 500: Closed at 921.39
Resistance: The lowest bottom channel line of the March downtrend (926) stopped the index dead Friday. Then the predominant bottom channel line at 952 and the 10 day MVA (951.50). The May down trendline (972) and the 18 day MVA (970.11). After that 984 is the March down trendline. The 50 day MVA at 1018.55 and the second March down trendline (1025). Then the May low at 1048.96. 1060 offers minor resistance from previous prices. Then the February lows at 1074.
Support: The October 1998 bear market low at 923.32. 900 is after that. Then 855 the October 1997 low and 817 the February 1997 high.
Dow: Closed at 8684.53
Resistance: The bottom of the channel of the March downtrend at 8845. Then 9000 and the 10 day MVA at 9009.55. The 18 day MVA (9157.77) and the March down trendline at 9235. Then price resistance at 9250. Then 9500 and the 50 day MVA (9527.31).
Support: There is a rest stop at 8500. The September closing low is 8235.81 and the intraday low is 8062.
Economic Calendar
7-15-02
Business inventories, May (8:30): 0.0% expected, -0.2% prior.
7-16-02
Greenspan speaks to Senate
Industrial production, June (9:15): 0.4% expected, 0.2% prior.
Capacity utilization, June (9:15): 75.8% expected, 75.5% prior.
7-17-02
Greenspan speaks to House
Building permits, June (8:30): 1.660M expected, 1.676M prior.
Housting starts, June (8:30): 1.680M, expected, 1.733M prior.
7-18-02
Initial claims (8:30): 395K expected, 403K prior.
Leading economic indicators, June (10:00): 0.0% expected, 0.4% prior.
Philadelphia Fed, July (12:00): 18.0 expected, 22.2 prior.
7-19-02
Trade balance, May (8:30): -$35.3B expected, -$35.9B prior.
CPI, June (8:30): 0.1% expected, 0.0% prior.
Core CPI: 0.2% expected, 0.2% prior.
Treasury budget, June (2:00): $25.0B expected, $31.9B prior.
SUBSCRIBER QUESTIONS
Q: I am still confused over the strategy involved in recommending puts or calls with low or no open interest when you have repeatedly stated that you prefer options with 100 OI or better yourself. Are we to ignore your advice? Do you yourself buy options when there is no OI? Also it would be reassuring to hear from you that when you are recommending these low or no OI options that you are not selling the relavant puts and calls yourself. If these questions have occured to me I am sure they have occured to others as well and it would be reassuring to me if not to the readership in general if you would outline and clarify your position for me on these points.
A: It is our general rule of thumb to buy options with 100 or more open interests primarily because that allows us to better use stop losses and shave the spread. In order for a stop on an option to work it has to be triggered by a sale at that level. If there are not many ongoing trades in the option (the problem with low OI) then you cannot utilize stops effectively. We are driven by the technical pattern of the play and, if using options, the ability of that option to make us an acceptable level of profit on the play. If the right combination of pattern and option to make our money exists (we have to bypass some good patterns because the option deltas and prices just won't cut it) but there is low OI, we will still make the play knowing, however, we will have to monitor the trade without a stop. No big deal really; I did that all the time when I was working another job. There were sometimes I could not make plays because I knew I would be too busy, but I worked around it. There have been many times the play was so good but there were no OI; I was the only OI in those options and still made great profits. I just had to be ready to sell and willing to take what the market maker was willing to pay. On no positions we discuss in the report are we taking opposite positions to those discussed or taking positions before the plays are discussed unless it has alrady been on the report and has hit a buy point.
SEMINARS NOW ON CD!!
To learn more about options so you can take advantage of up and down markets, check out the Options You Can Use seminar now on CD's! Also be sure to look at the Technical Analysis series on CD as well as the stock splits and covered call series. Go to
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and look for the link to the CD seminars. This is Jon Johnson's internet site for online seminars and the theories taught are the same that have delivered dozens and dozens of fantastic downside put plays during this downtrend. Hope you check it out.
THE PLAYS:
BONUS PLAYS:
New:
HNR (Harvest Natural Resources--$4.89; +0.09; no options): Independent oil and gas
http://biz.yahoo.com/p/h/hnr.html
STATUS: Cup w/handle. Nearing a 3-year high, HNR is moving through this base after blasting off from 1.50 in March. This base is giving it a good rest after the move, with accumulation ongoing throughout. Accumulation weeks lead distribution weeks 5 to 0; excellent accumulation during this rest stop in the move. 7.55 is our initial target as it represents some former price tops and bottoms in years past, but it can move higher for us longer term.
Volume: 56.8K Avg Volume: 203.545K
BUY POINT: $5.15 Volume=305K Target=$7.55 Stop=$4.39
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/hnr.html
Downside:
EXPE (Expedia--$59.75; +0.76; optionable): Online travel
http://biz.yahoo.com/p/e/expe.html
STATUS: EXPE has made us money to the downside in the past, and it looks set up to do it for us again. After a long uptrend it broke down in June and has been riding down the 18 day MVA since, rallying now for the second test of that level (60.92). Friday it traded up to 61.96, but reversed, unable to muster the volume to move up and hold. This 'tombstone' doji indicates it is ready to test lower once again, and it has plenty of room to do so.
Volume: 2.215M Avg Volume: 2.281M
BUY POINT: $59.45 Volume=2.5M Target=$55.25 Stop=$62.25
POSITION: UED TM - Aug. $65 put (-55 delta)
http://www.investmenthouse.com/cs/expe.html
USPI (United Surgical--$27.04; +0.67; optionable): Specialized health services
http://biz.yahoo.com/p/u/uspi.html
STATUS: Put. Smashed the 50 day MVA (27.66) in early July on the drop to 23. it has rebounded, but on lower volume. Friday the stock moved higher, trading above the 50 day MVA on the high before reversing. The stock moved up on lower volume, an unconvincing move that looks like a reversal. Plenty of room to the downside and we are looking to take advantage of it.
Volume: 225.8K Avg Volume: 375.045K
BUY POINT: $26.85 Volume=450K Target=$22.55 Stop=$28.50
POSITION: QPJ TZ - Aug. $32.50 put (-76 delta, low OI)
http://www.investmenthouse.com/cs/uspi.html
NEW PRE-ANNOUNCEMENT PLAYS
TSCO (Tractor Supply--$66.17; +1.43; no options): Farm and ranch supplies for real farmer and ranchers and dudes as well. Forecast to announce a split on 7-15-02 after the market closes in conjunction with earnings.
http://biz.yahoo.com/p/t/tsco.html
BACKROUND: Based upon our research it does not appear that TSCO has split its stock. The annual shareholder meeting was on 4-18-02 at which time no additional shares were authorized. The company has sufficient shares for a 2 for 1 split. It is at an all-time high and soaring; a split Monday looks good
STATUS: TSCO has a lot of appeal. We have been looking to get into this stock again for awhile. Missed a chance in early June, but now it looks as if it is giving another one. This is like a mini-Home Depot. It has all kinds of supplies for farms and ranches of all sizes (urban ones as well). Western wear, farm toys, real tractor supplies, farm animal feed and housecat toys. It has a lot of appeal. This could indeed be a new Home Depot for the 2000's. It has rallied to a new high and has now tested back to the 50 day MVA (62.63) and bounced Friday on rising, above average volume. It did not hold over the 18 day MVA (66.83) intraday, but we like the pullback on lower volume and are looking at entering positions Monday before the announcement after the close.
Volume: 148.5K Avg Volume: 118.045K
BUY POINT: $67.45 Volume=177K Target=$80.94 Stop=$62.45
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/tsco.html
PRE-ANNOUNCEMENT PLAYS
The pre-announcement plays have come under pressure over the past week, breaking down some good patterns as the market tears down some leading stocks. That is a true sign of some bearish action that is getting long in the tooth; when leaders are finally sold off the sellers are getting to the entire market and that is a sign of bottoming. In this case most likely an interim bottom as the sentiment indicators do not indicate extremes.
We will need to let BBBY and EDMC rebuild their patterns. NYT, HUG, CLE, OSK and URBN all suffered last week and undercut their 50 day MVA. They tested the 50 day MVA Friday but could not recover. They need to get back over that level early this week and then do some rebuilding. So far not catastrophic moves, but they need to right the ship this week. We still anticipate a market bounce that could bounce them higher. Leading stocks that are going to remain leaders will find support at their 50 day MVA as the big money comes in to buy them at that point. So far that has been the case for these stocks; now we see if it will continue.
CHBS (Christopher Banks--$39.51; -1.2; 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 gave the breakout early last week and then reversed. Held the 50 day MVA Thursday on a wild reversal but Friday undercut that level (40.06) Friday though volume fell substantially to below average levels. Apparel was under a lot of pressure last week as same store sales for clothes sellers were generally lower. CHBS sold as well, but it held up better than others. We are going to watch for a rebound off of the 50 day MVA as a chance to take some additional positions heading into a potential split announcement.
Volume: 338.2K Avg Volume: 354.909K
BUY POINT: New positions: 42.25 (aggressive). Breakout: $44.05. 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
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:
ACMR (A.C. Moore--$42.49; -1.17; no options): Splits 2:1 on 8-1-02
http://biz.yahoo.com/p/a/acmr.html
STATUS: ACMR has been playing with us, making that good bounce off of the 50 day MVA (42.65) and rallying, only to run into the selling late last week. That took it back down to the 50 day MVA Friday though it managed to close right at that level as volume rallied. That shows potential support as there were buyers to push it back up when it went below that level intraday. Based on the action in the apparel sector we have to be careful, but CHBS is one of the stronger performers. Looking for a bounce up from here, but if it does not come we will have to move on and then look for the next entry point.
Volume: 115.5K Avg Volume: 102.863K
BUY POINT: New positions: Aggressive: 44.25 (over the 18 day MVA). Breakout: 48.05 (original buy point $44.29). Volume=100K Target=$48.55 (initial). Breakout: 48.01. Stop=$41.75
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/acmr.html
ANFI (American National--$14.80; 0.00; no options): Splits 5:4 on 7-19-02
http://biz.yahoo.com/p/a/anfi.html
STATUS: Tapped the 50 day MVA on the low (14.33) for the second straight session on lower volume, rebounding on the close. It has been choppy trading here, but we are looking for a run this week toward the split as it is successfully holding the 50 day MVA. Friday it just tapped the buy point on the high. We are ready to pick it up this week if it starts back up.
Volume: 30.6K Avg Volume: 76.363K
BUY POINT: From here: 15.35. Volume=100K Target=$19.25 Stop=$14.74
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/anfi.html
ERES (Eresearch Tech--$20.38; +0.48; no options): Splits 3:2 on 7-17-02
http://biz.yahoo.com/p/e/eres.html
STATUS: Coming up on the split after selling back to the 50 day MVA the past week (20.51). Volume has kicked up to strong, above average levels the past two sessions. Friday it tried to make a strong move over the 50 day MVA but could not make it. Coming in just 3 days before the split, we think we could get a nice bounce up off of the 50 day MVA for a gain.
Volume: 271.2K Avg Volume: 138.545K
BUY POINT: $20.95 Volume=150K Target=$26 Stop=$21.20
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/eres.html
HBHC (Hancock Holding--$63.84; +1.79; no options): Splits 3:2 on 8-8-02. Regional bank.
http://biz.yahoo.com/p/h/hbhc.html
STATUS: Just announced a split and bounced off of the 50 day MVA on rising, above average volume after testing the move to a new high in June (at 67.50). The neat thing about the move is that the stock has been in a big, 4.5 year base and broke out of it with that June move on huge volume. It is now testing that breakout with the move down to the 50 day MVA. This makes the pattern even more appealing.
Volume: 39K Avg Volume: 25.59K
BUY POINT: $64.05 Volume=38K Target=$73.65 Stop=$59.57
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/hbhc.html
STJ (St. Jude Medical--$34.01; +1.25; optionable): Medical appliances
http://biz.yahoo.com/p/s/stj.html
STATUS: Put. STJ peaked out in late May and then plunged off the cliff. Broke the 200 day MVA in late June and has been falling down the 10 day MVA (34.41) ever since. It rallied up Thursday and Friday but on lower and lower volume. It tapped the 10 day MVA on the high (34.25) and fell. Looks primed to fall here, and it has room for us to make some money once again on the downside with this stock.
Volume: 1.772M Avg Volume: 861.772K
BUY POINT: $33.95 Volume=1.2M Target=$30.61 Stop=$31.57
POSITION: STJ TH - Aug. 40 put (-70 delta) OR STJ VH - Oct. 40 put (-68 delta)
http://www.investmenthouse.com/cs/stj.html
POST-SPLITS BEST PLAYS:
COCO (Corinthian Colleges--$30.13; -0.68; optionable): Education and training
http://biz.yahoo.com/p/c/coco.html
STATUS: Split in May and rallied higher on some very strong volume. It peaked at 34, making us some good money on the way. It has now tested back to the 50 day MVA (29.44) and looks ready to make a bounce up from here to continue the rally. We are looking at an initial target of 34 with an option play, but stock positions can be used for a move up to the higher target.
Volume: 553.6K Avg Volume: 479.181K
BUY POINT: $31.35 Volume=450K Target=$37.25 Stop=$29.16
POSITION: UCS KE - Nov. $25 call (83 delta) and/or stock
http://www.investmenthouse.com/cs/coco.html
DCOM (Dime Community Bancshares--$24.9; -0.18; no options): Savings & Loan
http://biz.yahoo.com/p/d/dcom.html
STATUS: After splitting in April, DCOM rallied to a new high at 27 and then corrected back with the market in May and June. It has bucked the trend in July, rising as the market sold off. That move up was on very good volume, and the rise built the right side of the cup base. Last week it peaked out and started to trail off on lighter, below average volume. That is the creation of the handle. The pattern accumulation is 2 up weeks to no down weeks. This is a stock that continues to move up and split. We like that as we get rewarded for staying with a good stock. No brainer.
Volume: 141.4K Avg Volume: 193.545K
BUY POINT: $26.01 Volume=290K Target=$31.25 Stop=$23.85
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/dcom.html
IFIN (Investors Financial Services--$33.13; +2.53; optionable): Asset Management
http://biz.yahoo.com/p/i/ifin.html
STATUS: Put. We are looking at a downside play on this one even though it rallied up on very strong volume Friday back up toward the 200 day MVA (34.14). It broke through that level in late June, tested it, and tanked. It is now trying to recover the level, but we don't think it is ready to make it, and there is plenty of room to the downside.
Volume: 983K Avg Volume: 299.454K
BUY POINT: $32.75 Volume=450K Target=$28.79 Stop=$34.55
POSITION: FLQ VH - Oct. $40 put (-61 delta)
http://www.investmenthouse.com/cs/ifin.html
End Part 2 of 3
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us stock market
trend trading stock
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