|
|
us stock market, trade stock
Begin Part 2 of 2
Support and Resistance Levels
Nasdaq: Closed at 2427.72.
Resistance: 2650. 2890 to 2900 is next before the 3000 level.
Support: 2300.
S&P 500: Closed at 1318.80.
Resistance: Interim at 1335. Then 1360 to 1375.
Support: Down trendline at 1300 to 1305.
Dow: Closed at 10,903.32.
Resistance: 11,020 - 11,028. After that, 11,400.
Support: 10,750. Then 10,650.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
2-13-01
Retail Sales, January (8:30): 0.8% actual versus 0.5% expected and 0.1% prior.
Retail Sales ex-auto, January (8:30): 0.7% actual versus 0.4% expected and 0.0% prior.
Greenspan semi-annual testimony on economy, part 2.
2-14-01
Business Inventories, December (8:30): 0.4% versus 0.5% prior.
2-15-01
Export Prices ex-ag., January (8:30): -0.2% versus -0.2% prior.
Import Prices ex-oil, January (8:30): 0.9% versus 0.9% prior.
Philadelphia Fed, February (10:00): -23.0 versus -36.8 prior.
2-16-01
PPI, January (8:30): 0.2% versus 0.0% prior.
Core PPI, January (8:30): 0.1% versus 0.3% prior.
Housing Starts, January (8:30): 1.550M versus 1.575M prior.
Building Permits, January (8:30): 1.493M versus 1.493M prior.
Capacity Utilization, January (9:15): 80.3% versus 80.6% prior.
Industrial Production, January (9:15): 0.0% versus -0.6% prior.
Preliminary Michigan Sentiment, February (10:00): 94.0 versus 94.7 prior.
SUBSCRIBER QUESTIONS
Q: I have a question about trading tech stocks in general. According to some on CNBC, the Nasdaq is undergoing a structural change in the sense that the days of high multiple stocks are over. I would really appreciate it if you have any thoughts on this issue and if you could share with us.
A: The market goes in cycles. In bull runs multiples don't mean a lot. Only when a bear market or correction occurs do the value players come out and start talking about the 'value' of stocks, referring to P/E ratios as being of primary importance. They look for P/E's below 10 as good values. That is what is going on right now with the Nasdaq bear market. Is this a 'structural' change? For now that is all we hear on the television because growth stocks that trade at high earnings multiples are sold when future earnings expectations are lowered. So in that sense there is a change in the Nasdaq, but it is because the economy has slowed.
Is it permanent? No. When earnings expectations start to rise again based on improving economic conditions, growth stocks with the best earnings, sales, and revenue potential will start back up and will grow as long as earnings expectations for the future continue to rise. Thus, high multiple stocks are accepted in good economic times because investors can build in more expectations of growth.
Don't believe it? A look at the biggest winners in the market year in and year out, those stocks that are leading the economy in the important sectors, start their massive runs with P/E ratios 20% higher than the rest of the market. They already have what some would consider high P/E's before the run starts. When a run is finished, the P/E has usually run from 20 to 30 to 80 or more. 20 may have seemed high, but it is nothing compared to 80. A value investor will never get in on these stocks because the value investor will shy away from a stock with a P/E of 20 or more. Problem is, in a good economy, stocks with P/E's of 10 or so are usually the laggards that don't have superior earnings power or are not leaders in a leading sector that can make a huge run. You are buying mediocrity and will get mediocre returns compared to the better growth stocks.
Right now value investors are in their element, i.e., a weak economy and weak market. They still won't touch tech stocks because even with the beating they have taken they are still 'overvalued.' Well, when this market starts back up and we look back, we will see that the growth stocks that took off and left the 'value' stocks in the dust still had P/E's that value investors would not touch. That is history.
TEAM TRADES
Today was a day we got frustrated with the market action, and when we saw the rally start to fade we felt it was a perfect time to sell calls on some long term positions. We were pretty indiscriminate in choosing our stocks, so we will go over our method as opposed to specific plays. We prepared a bit ahead of time and listed all near term options on our stocks. We picked the ones we liked, looking at in the money in February and March calls. Not a lot of time at all in February, so to get some good premiums we also had to look at March.
We like selling slightly in the money because we can pocket more premium that way as the stock falls. Why? Because the in the money portion of the option is intrinsic value, and as the stock moves down, it shaves that off faster than time value. For example, if we were looking at a stock trading at $53, the $50 calls would be $3 in the money. The $55 calls would be $2 out of the money, i.e., it would have no intrinsic value. The $50 calls sells for $5.50. The $55 call sells for $3.75. When the stock falls, the $50 call loses some intrinsic value and some of the extrinsic value. The $55 call loses only extrinsic value. Based on option pricing models, the further a call is out of the money, the less value it losses as the stock falls. We want to take advantage of the loss of the intrinsic value as that gives us a double dip on the downside.
For a review of frequently asked questions, please use the link below:
http://www.investmenthouse.com/1questions.htm
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:
CLPT (Cellpoint--$10.25; +0.25; no options): Telecom: Diversified
STATUS: This stock is deep in a base, like most other stocks in this sector. A new issue in July that ran to a high of 46.38, it was unable to break back over its 50 day MVA (currently at 9.70) until Monday, when rising volume finally broke the resistance level. The stock opened Tuesday just under Monday's high (10.69) and fell off that price despite the gain on the day, as volume rose just slightly to 51,100 (avg. 35,000). The moving average is reinforced by other prices since November, so the support looks solid enough to hold the stock on a continued pullback. A low-volume stock.
BUY POINT: Over 11, on continued strong volume.
POSITION: Stock.
http://www.investmenthouse.com/cd/clpt.html
(Click to view the chart)
http://biz.yahoo.com/p/c/clpt.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) NFB: Breaking out and remains a buy.
2) EC: Moving up nicely after testing its breakout.
3) ESA: Volume spikes and an ascending wedge: what a combination.
4) ASBC: Showing a star doji at support in its handle.
5) ACS: Getting ready for a move up.
6) SGR: A new high on stronger volume.
Updated stocks tonight: Loading up on some plays in this section as we revamp the New Leaders portfolio.
NFB (North Fork Bancorp--$25.22; +0.34; optionable (NFB)): Regional Banks
STATUS: Want to keep an eye on this one; the stock is trying to break out of its pennant, beating the buy point of 25.13 on great volume (1.38 million; avg. 579,000). Pulled off the high of 26, so we will have to see renewed life tomorrow, and may get it on the volume momentum. The company enjoyed a "buy" rating issued today, and also announced an acquisition, which sent share price up. Great money flow and high relative strength. Positive and improved buying.
BUY POINT: Remains a buy on the breakout up to 26.39.
POSITION: Stock and/or May $25 calls to buy (NFB EE).
http://www.investmenthouse.com/cd/nfb.html
(Click to view the chart)
http://biz.yahoo.com/p/n/nfb.html
EC (Engelhard--$23.60; +0.44; optionable (EC)): Metals & Mining: Industrial
STATUS: The stock is moving up on good volume after testing its recent ascending wedge breakout (reached a breakout high of 23.95). Volume chalked in at 766,900 (avg. 448,000). The move came after a pullback to the 10 day MVA (22.92) over the last three days, and after the stock threw a huge volume spike last Wednesday. Looks ready to break over the previous closing high (23.74). Great money flow and high relative strength (that has broken out ahead of price, a bullish sign).
BUY POINT: Over 23.95 on continued strong volume.
POSITION: Stock and/or April $20 calls to buy (EC DD).
http://www.investmenthouse.com/cd/ec.html
(Click to view the chart)
http://biz.yahoo.com/p/e/ec.html
ESA (Extended Stay America--$17.52; +0.22; optionable (ESA)): Leisure: Lodging
STATUS: The stock is in an ascending wedge that is using the 10 day MVA (17.21) as lower support in the pattern. Pattern high is 17.64, a level that a couple of volume spikes have not been able to break out the stock. However, those are bullish indicators of a breakout. Volume shot up to 744,900 Tuesday (avg. 313,318) on the slight move up. The stock leapt to the pattern's high January 23 on a good earnings report. Good buying, high money flow and a relative strength that has broken out ahead of price.
BUY POINT: Breakout: 17.77, on volume of 423,000 or better. Remains a buy on the breakout up to 18.66.
POSITION: Stock and/or March or June $15 calls to buy (ESA CC or FC).
http://www.investmenthouse.com/cd/esa.html
(Click to view the chart)
http://biz.yahoo.com/p/e/esa.html
LIN (Linens 'n Things --$36.30; +1.97; optionable (LIN)): Retail
STATUS: The stock is moving up in a very large base (prior basing high of 52.06 is back in May of 1999); we mention the larger base because the intraday high of 37 tapped the down trendline that connects the highs from that month and July of the same year. LIN moved up Tuesday from support (10 day MVA, 34.66) on strong volume (962,700; avg. 537,000), making a bid for the February high of 37.88 (handle high in a shorter base with a prior high of 41.44). That high was reached on a price run started from the December low of 22.94. The stock pulled back from that high on decreasing volume Friday and Monday, setting up the pop today. On a move over the high, LIN will have broken the long term down trendline. Great money flow and high relative strength (that has broken out ahead of price, a bullish indicator).
BUY POINT: Breakout: 38.01, on continued rising volume (breakout volume is 806,000). Remains a buy on the breakout up to 39.91.
POSITION: Stock and/or April $35 calls to buy (LIN DG).
http://www.investmenthouse.com/cd/lin.html
(Click to view the chart)
http://biz.yahoo.com/p/l/lin.html
BOH (Pacific Century Fncl--$20.15; -0.08; optionable (BOH)): Regional Banks
STATUS: Pulling back to support in the handle of its 8.5-month cup base on below average volume (210,700; avg. 325,090). Prior basing high is 23.19. The stock broke above its 200 day MVA (16.63, currently) in late December, and has continued the climb into the upper right side of the base. Looks ready for a move up, though the stock just might move down to tap the 10 day MVA (20.02) first. Handle high is 20.99. Good money flow and improving buying, and relative strength has broken out ahead of price, a bullish sign.
BUY POINT: 21.12, on volume of 488,000 or better.
POSITION: Stock. May $20 call options have 53 open interests (BOH ED).
http://www.investmenthouse.com/cd/boh.html
(Click to view the chart)
http://biz.yahoo.com/p/b/boh.html
ASBC (Associated Banc-Corp--$34.19; -0.19; optionable (QVS)): Regional Banks
STATUS: Pulling back to support in a short handle to quite a lengthy base, showing a perfect (star) doji on volume of 208,900 (avg. 313,000), volume that has steadily pulled back right along with price in the kind of orderly pullback we like to see. The star doji is just above support (10 day MVA, 34.62), and is a strong indicator of a move up. However, we would prefer a bit longer handle. Just in case the pullback is not over, the 18 day MVA is below at 33.80, a level reinforced by other prices at the 34 level. Handle high is 36.25. Money flow is huge into this stock.
BUY POINT: Breakout: 36.38, on volume of 470,000 or better.
POSITION: Stock and/or March or June $35 calls to buy (QVS CG or FG).
http://www.investmenthouse.com/cd/asbc.html
(Click to view the chart)
http://biz.yahoo.com/p/a/asbc.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: We are in the process of flushing out this portfolio, as most of the stocks featured here are no longer in leadership positions. We are previewing a few of the possible candidates tonight (ACS, CPN, SGR, ESRX, NATI).
ADBE, AMCC, ARBA, BEAS, BRCD, CIEN, EMC, EXTR, GLW, JNPR, NEWP, NTAP, PMCS, SCMR, SEBL, VRSN, VRTS
ACS (Affiliated Computer--$65.61; +0.16; optionable (ACS)): Computer Software & Services: Information Technology Service
STATUS: The stock is in a steady uptrend since July, and hit a February high of 67.75 last week, from which price is pulling back on steadily, declining volume (156,300; avg. 324,000). We like such orderly pullbacks, and look for a move back up soon: the stock closed showing a tight doji on the candlestick chart, but on the close near the low (65.48), can complete the move down to the 10 day MVA (65). That level is reinforced by a string of prices from late January/early December. On a break over the recent high, ACS will be heading for a new all-time closing high. High relative strength and outstanding money flow.
BUY POINT: Aggressive: On a move up from here on rising volume.
POSITION: Aggressive: Stock and/or April $60 calls to buy (ACS DL). April $65 options have 55 open interests (ACS DK).
http://www.investmenthouse.com/cd/acs.html
(Click to view the chart)
http://biz.yahoo.com/p/a/acs.html
CPN (Calpine Corp--$45.62; +0.22; optionable (CPN))): Electric Utilities
STATUS: The stock is currently testing its breakout from a double-bottom with handle pattern (buy point is 43.49), but appears to have found support in the range of the intraday low of 45.52. On the breakout, the stock moved over its down trendline (connecting September and December highs) on good volume, which is bullish. Breakout high is 48.80, and the stock pulled back the last two days from there on steadily lower volume (reaching Tuesday 2.6 million; avg. 4.4 million). Should the stock continue down in the test, look for support at the down trendline/10 day MVA, 43.39). Prior high in the stock's 18-week base is 52.97. Relative strength has broken out ahead of price, another bullish indicator for the stock.
BUY POINT: Aggressive: From here, or from the 43 range (10 day MVA), on rising volume. Safer: Over the breakout high of 48.80, on volume in the range of 3.5 million.
POSITION: Both positions: Stock and/or April $45 calls to buy (CPN DI).
http://www.investmenthouse.com/cd/cpn.html
(Click to view the chart)
http://biz.yahoo.com/p/c/cpn.html
SGR (The Shaw Group Inc--$50.15; +2.05; optionable (SGR)): Manufacturing: Industrial Equipment & Components
STATUS: The stock is in a steady uptrend since the first of last year, and posted Tuesday a new all-time closing high as volume moved above average levels (585,500; avg. 357,318). The new high just topped the December closing high of 50.06 as the stock continued to move up from support (18 day MVA, 45.59) to complete a short 6-week base. The closing price is just under two consecutive highs reached in December at 50.50. Look for a move over that possible resistance on higher volume. Huge money flow and high relative strength. Buying looks good as well.
BUY POINT: Over 50.50 on continued rising volume.
POSITION: Stock and/or April $50 calls to buy (SGR DJ). Options have less than 100 open interests (90), so take care if using them.
http://www.investmenthouse.com/cd/sgr.html
(Click to view the chart)
http://biz.yahoo.com/p/s/sgr.html
ESRX (Express Scripts Inc--$99.66; +1.66; optionable (XTQ)): Health Services: Specialized Health Services
STATUS: This stock is in a steady uptrend since May of last year, and reached a new all-time closing high in December at 105.44. Since then, price corrected back to the 50 day MVA (currently at 90.16; at that time, near 85), testing that level twice, and now has moved back up from its second test of the 18 day MVA (95.10). The stock is on its way to a new high, but will need to break possible resistance first at 101, a price hit twice within the last week. Stronger volume will be key, and it shot above average Tuesday, reaching 858,600 (avg. 556,500). The stock shows steadily climbing money flow and high relative strength (that has moved out ahead of price, a bullish sign). Just higher in after hours trading (at the time of this writing).
BUY POINT: Over 101, on continued rising volume (in the range of 1 million).
POSITION: Stock and/or March $100 calls to buy (XTQ CT). May $100 call options have only 8 open interests (XTQ ET).
http://www.investmenthouse.com/cd/esrx.html
(Click to view the chart)
http://biz.yahoo.com/p/e/esrx.html
NATI (National Instruments Cp--$54.06; +0.37; optionable (SJQ)): Computer Hardware: Peripherals
STATUS: This stock is in a 10-month base and pulling back from a handle high (57.56). Price opened Tuesday just above the 10 day MVA (53.16), which was tested on the low of 53.19. Moved moved up from there, but volume was lower (208,000; avg. 251,045) and below average, so the stock pulled off the high of 54.94. That is okay; the stock looks ready for a move up when volume kicks in. This "handle" is testing the stock's recent breakout from as ascending wedge pattern that formed in the upper right side of the base (prior high is 59.50), so NATI is just about ready to clear this base. That can come on a breakout from the handle. Previous all-time closing high is 56.75.Outstanding money flow and high relative strength.
BUY POINT: Breakout: 57.69, on volume of 377,000 or better. A buy on the move up to 60.58.
POSITION: Breakout: Stock. June $55 call options have 37 open interests (SJQ FK).
http://www.investmenthouse.com/cd/nati.html
(Click to view the chart)
http://biz.yahoo.com/p/n/nati.html
SCMR (Sycamore Networks Inc--$22.56; -0.50; optionable (SMZ)): Computer Hardware: Networking & Communication Devices
STATUS: The stock continues to slide down its down trendline as volume finally fell just below average (8.9 million), showing a doji on the pullback. The company reported earnings after the bell, and beat forecasts, but did not alter its cautious outlook for the year, expecting its sequential growth rate to slow in the second half. In this climate, such news is not likely to give the stock the boost it needs; the stock was trading up in after hours (closing then at 23.50), but that still seems a long distance from the 10 day MVA (27.03). As stated in last night's report, SCMR needs to break over the 50 day MVA (41.90) on strong volume, since that resistance has beat the stock back down twice (December and January). No positions for now.
http://www.investmenthouse.com/cd/scmr.html
(Click to view the chart)
UP & COMERS PORTFOLIOS:
EXDS, TQNT, BVSN, SANM, PKI and GMST for now.
No reports on stocks in this portfolio tonight.
MEMBER PORTFOLIO: BRCM, CHKP, CSCO, EMLX, IDTI, INTC, JDSU, MVSN, NT, PWER, SUNW, VTSS
EMLX (Emulex Corp--$42.25; +1.87; optionable (UEL)): Computer Hardware: Peripherals
STATUS: Stopped the selling quicker than we thought, and moved up slightly as volume dropped back to 14.5 million (avg. 5 million). So volume remains strong. After the stock was cut to pieces Monday on the potential earnings warning, we are not looking for a move up of any strength, at least in the very near term. We will look for a hold at the 40 level, however, for when the stock can make the move up. Any play on the stock below the 200 day MVA will be more aggressive than usual; we prefer to let the stock break back over that level, but it is over 11 points ahead, which may be tempting in a market rally. The stock only mustered the small move up in the early rally today, however (high was 43.63), so that shows how beat up it is for now.
BUY POINT: Aggressive: On a move up from here on rising volume in a market rally.
POSITION: Aggressive: Stock and/or April $40 calls to buy (UMQ DH). 420 open interests.
http://www.investmenthouse.com/cd/emlx.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.
|
us stock market
trade stock
|
