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us stock market, trading strategy
Note: The link for BRCM is corrected in this version.
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.
Best Plays: We like all the plays we put on the Daily, but these we are really focusing on for the next session.
1) ECLP: Looking for a roll up from the trendline.
2) RBNC: Ready to break out of an ascending wedge.
3) RCGI: Star doji on a low-volume pullback to support.
4) ESRX: Looking for a move up from the doji.
5) BRMC and IDTC: Look ready for another roll.
Rolling Patterns: In an early rally this week, these stocks look ready to roll back up.
IWOV (Interwoven Inc--$27.00; +0.81; optionable (IUW)): Business Software & Services
STATUS: Developed a rolling pattern ranging between 20 and 37 at the bottom of its 16-week base. The stock hit bottom on the last dip in the pattern Wednesday, and moved up the last two days of the week on continued strong but lower volume (reaching 3.9 million Friday; avg. 3.7 million). The fact that it fought off the selling Friday speaks well. Closed just under its 18 day MVA as the high tapped above it at 28.25. 50 day MVA is at 30.84. Looking for a continued run up to 35-37 range (the 200 day MVA is at 35). High money flow, and up slightly at the close of after hours trading Friday.
BUY POINT: Over 28.25 on rising volume, for the roll up.
POSITION: Stock. June $25 options have 32 open interests (IUW FE).
http://www.investmenthouse.com/cd/iwov.html
(Click to view the chart)
http://biz.yahoo.com/p/i/iwov.html
ECLP (Eclipsys Corporation--$21.56; -2.19; optionable (IQV)): Health Services Software
STATUS: This stock is in a 14-month base and is currently in a rolling pattern in the upper right side (prior base high is 31.06). Dips in the pattern have found support at an up trendline (connecting November and December lows), to which the stock tapped on its low Friday (21.13) on lower volume (268,400; avg. 517,272). The pattern is rolling between the trendline and 26-27. We are looking for a move back up from the support on stronger volume, for a roll back up. 50 day MVA is at 24.08. The stock shows good buying and high money flow.
BUY POINT: On a move back up from the trendline, on stronger volume.
POSITION: Stock and/or June $20 calls to buy (IQV FD). These options have 12 open interests, so take care if using them.
http://www.investmenthouse.com/cd/eclp.html
(Click to view the chart)
http://biz.yahoo.com/p/e/eclp.html
New Stocks:
RBNC (Republic Bancorp Inc--$12.69; +0.06; no options): Regional Banks
STATUS: In an ascending wedge consolidation that formed after a strong run up the right side of the stock's 15-month base. Volume dropped off throughout the wedge, but for the last two days of building volume, reaching just under average Friday (219,700). Pattern high is 12.88. The stock moved up from its 10 day MVA (12.34) on the nice rise in volume. Looking for a breakout. Great money flow and buying, and the stock was up slightly at the close of after hours trading on Friday.
BUY POINT: 13.01, on volume of 297,000 or better. Remains a buy on the breakout up to 13.66.
POSITION: Stock.
http://www.investmenthouse.com/cd/rbnc.html
(Click to view the chart)
http://biz.yahoo.com/p/r/rbnc.html
RCGI (Renal Care Group Inc--$26.63; -0.31; optionable (NUQ)): Specialized Health Services
STATUS: The stock has formed a pennant/ascending wedge consolidation above its 50 day MVA (25.61) after reaching a December high of 28.63. The stock was near that high earlier last year (January and July), but this time has not dropped off steeply as it did the previous two times, instead forming this tighter pattern. Interesting action to watch, as the pattern tightens, showing a perfect (star) doji Friday on the lowest volume the stock has seen in several months (77.400; avg. 391,409). Holding just above the 18 day MVA (26.61). Looking for a breakout from this pattern. Strong money flow.
BUY POINT: 28.76, on volume of 528,000 or better. Remains a buy on the breakout up to 30.20.
POSITION: Stock and/or June $25 or $30 calls to buy (NUQ FE or FF).
http://www.investmenthouse.com/cd/rcgi.html
(Click to view the chart)
http://biz.yahoo.com/p/r/rcgi.html
Updates:
CHBS (Christopher & Banks Corp--$31.44; +0.72; no options): Apparel Stores
STATUS: Broke out of a saucer with handle in late January, running to a breakout high of 33.97 before pulling back to a test of its 18 day MVA (26.61). Breakout (buy) point is 25.44, to the stock has held nicely above that. Has had a volatile pullback while volume also pulled back overall, reaching its lowest levels Friday (124,300; avg. 224,500). The stock gapped below the 18 day MVA on the open then recovered back over its 10 day MVA (26.75). Look for a hold at this support for a move back over 34 on stronger volume. Strong money flow and high relative strength, along with good buying.
BUY POINT: Over 34, on volume of 168,000 or better.
POSITION: Stock.
http://www.investmenthouse.com/cd/chbs.html
(Click to view the chart)
http://biz.yahoo.com/p/c/chbs.html
ANF (Abercrombie & Fitch Co--$30.34; -0.56; optionable (ANF)): Retail: Apparel
STATUS: Continues to climb up the right side of its base (hit bottom at 8 back in May), currently consolidating above its 10 day MVA (30.11) on lower, below average volume after a nice run up from its December low of 14.75. Pulled back slightly Friday on volume of 889,300 (avg. 1.6 million), the low tapping the moving average. Looking for a move back over the February high of 31.75. High relative strength.
BUY POINT: Over 32, on volume of 1.2 million or better.
POSITION: Stock and/or May $30 calls to buy (ANF EF).
http://www.investmenthouse.com/cd/anf.html
(Click to view the chart)
http://biz.yahoo.com/p/a/anf.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 not changing our strategy on the current stocks in the leaders portfolio. Stocks such as JNPR, AMCC, CIEN, GLW, SEBL, VRSN and EXTR continue to exhibit superior earnings power and will rebound when the market rebounds. Indeed we still have investments in those stocks. What we are doing is looking to those leaders in the current market, those stocks that are asserting good patterns on top of strength in earnings while the other stocks we have been following work through their bases. This provides additional stocks that are showing more near-term potential in the current market. We focus on the stocks that are performing best in a down market as they tend to help lead when the market turns back up.
ADBE, AMCC, ARBA, BEAS, BRCD, CIEN, EMC, EXTR, GLW, JNPR, NEWP, NTAP, PMCS, SCMR, SEBL, VRSN, VRTS, ACS, CPN, SGR, ESRX, NATI, LLL
SGR (The Shaw Group Inc--$52.04; -0.31; optionable (SGR)): Manufacturing: Industrial Equipment & Components
STATUS: Pulled back just slightly from Thursday's all-time closing high (52.35) as volume declined slightly to 332,900 (avg. 364,000). The stock showed a pretty tight doji at the top of its trading range (high reached 52.55), after the low tested 51.53, just above Tuesday's high of 51.30 and above the late December consecutive highs of 50.50. On a pullback, look for support at that latter level, before the stock tops the recent new high.
SGR is behaving as its recent pattern shows: making a strong move up one day, then taking a breather the next day or two before surging back up. Strong money flow and buying, and high relative strength.
BUY POINT: Over 52.55 (intraday high), on volume of 449,000 or better.
POSITION: Stock. April $50 call options have 90 open interests (SGR DJ).
http://www.investmenthouse.com/cd/sgr.html
(Click to view the chart)
NATI (National Instruments Cp--$53.00; -1.31; optionable (SJQ)): Computer Hardware: Peripherals
STATUS: Broke below our targeted support level (10 day MVA, 53.51) to close just above the 18 day MVA (52.71). The low on the day ducked below the latter moving average before the stock recovered back over the support on lower volume (206,100; avg. 257,000). The stock's up trendline (connecting October, January and February lows) is at 52, and it has a tendency to pull back to the 50 day MVA (at 50) before it starts its bigger moves. The stock launched its breakout run on a bounce from this trendline February 5 (breakout high from the ascending wedge is 57.56). Great money flow and high relative strength. Buying picked up.
BUY POINT: On a move up from here on strong volume, or from a further test of 50-52.
POSITION: Stock. June $50 call options have 57 open interests (SJQ FJ).
http://www.investmenthouse.com/cd/nati.html
(Click to view the chart)
CIEN (Ciena Corporation--$82.63; -6.37; optionable (UEE)): Telecommunications: Processing Systems & Products
STATUS: Got the move down as Thursday's after hours trading suggested, with the stock moving lower than the 18 day MVA to close just above the 10 day MVA (81.81). Volume was lower but still very high (26.3 million; avg. 15.5 million). The high tapped the 50 day MVA (87.85) as the stock tried to move back over its short term down trendline (January highs). CIEN was unable to break above its 200 day MVA (89.47) in Thursday's rally. Look for a hold at the 10 day MVA until the market rallies back. It may try to test 80 before moving back up. The long term down trendline is currently at 76. Up to 83.50 in after hours trading.
BUY POINT: After a test of the 80 level on more selling next week.
POSITION: After that test we will look at some additional long-term positions with stock and short term positions with April $80 calls to buy (UEE DP).
http://www.investmenthouse.com/cd/cien.html
(Click to view the chart)
CPN (Calpine Corp--$47.24; +1.25; optionable (CPN)): Electric Utilities
STATUS: Continues to hold at the support level (44-46 range), bouncing up and down in a short trading range. Volume continues dropping (2.2 million; avg. 4.4 million) as the stock holds above the 10 day MVA (44.91). This is the fourth time since early October that the stock has moved up to the 48-49 level, so we are looking for a break of that resistance that will send the stock up toward the October high of 52.97. Relative strength has broken out ahead of price, a bullish sign, and the stock shows decent buying.
BUY POINT: Over 49 on volume of 3 million or better.
POSITION: Stock and/or April $45 calls to buy (CPN DI).
http://www.investmenthouse.com/cd/cpn.html
(Click to view the chart)
ESRX (Express Scripts Inc--$91.75; -0.88; optionable ( )): Specialized Health Services
STATUS: Closed showing a tight doji on volume that dropped below average (377,500; avg. 577,000). The doji is just above the 50 day MVA (90.60); on two dips back to that level (in January), the stock headed back up each time on runs of 4-6 days that yielded an average of 11 points. A move up is suggested by the doji; look for that move on stronger volume. Potential resistance at the 18 and 10 day MVAs (94.77 and 95.37, respectively). February high is 101, a resistance level previously noted.
BUY POINT: Aggressive: On a move up from here on stronger volume. Safer: Over 95.37 (18 day MVA), on volume in the range of 510,000 or better.
POSITION: Aggressive: Stock and/or May $90 calls to buy (XTQ ER). These options have only 15 open interests, so take care if using them. Safer: Stock and/or May $95 calls to buy (XTQ ES). Same story: 6 open interests for the latter option.
http://www.investmenthouse.com/cd/esrx.html
(Click to view the chart)
VRSN (Verisign Inc--$59.75; -4.22; optionable (QVR)): Internet Software & Services
STATUS: Showing a doji on a move down from its 10 day MVA (tested on the high of 61.75). Volume was lower at 5.47 million (avg. 6.6 million). We want to see the stock hold above the February lows at the 53 level should it pull back further, but the lower volume indicates the selling was not strong. Looking for a move back up to the 18 day MVA (67.10) for an aggressive play; 10 day MVA is at 63.52. Buying picked up. Was trading at 60 at the close of after hours trading.
BUY POINT: Long-term positions: On a move up from here or after a test of 53 to 55 on rising volume (average or better). Aggressive short term: On a move up from here or after a test of 53-55 early in the week.
POSITION: Long-term: Partial positions with stock. Aggressive short term: Stock and/or June $50 or $60 calls to buy (QVR FJ or FL).
http://www.investmenthouse.com/cd/vrsn.html
(Click to view the chart)
JNPR (Juniper Networks--$80.00; -12.19; optionable (JUX)): Computer Hardware: Networking & Communication Devices
STATUS: Sold off on the Nortel news. Volume was higher at 27.1 million (avg. 17.6 million) as the stock dropped near its lows to show a doji on the candlestick chart. Normally, dojis after a drop (or normal pullback) can mean a move back up, and we would like to see JNPR hold at this level and not take out the February low (75.31). The high volume doji shows it is trying to hold here. If it does we will look at adding a few more long term positions. Closed at 80.44 in after hours trading.
BUY POINT: Long-term: A hold here is worth a few more positions to us for the long term.
POSITION: Long-term: Stock.
http://www.investmenthouse.com/cd/jnpr.html
(Click to view the chart)
UP & COMERS PORTFOLIOS:
EXDS, TQNT, BVSN, SANM, PKI and GMST for now.
No plays.
MEMBER PORTFOLIO: BRCM, CHKP, CSCO, EMLX, IDTI, INTC, JDSU, MVSN, NT, PWER, SUNW, VTSS
A couple of potentially rolling patterns:
IDTI (Integrated Device Tech--$41.88; -3.43; optionable (ITQ)): Electronics: Semiconductor, Broadline
STATUS: Dropped below the 50 day MVA (43.71) Friday, showing a doji on top of its 10 day MVA. After a continued pullback to the 38-40 level (February low is 37.63), we are looking for a roll back up to the upper 44 range. Volume was lower on the move down, at 3.6 million (avg. 4.1 million).
BUY POINT: On a move back up from 38-40 on stronger volume (average or better).
POSITION: Stock and/or May $35 or $40 calls to buy (ITQ EG or EH).
http://www.investmenthouse.com/cd/idti.html
(Click to view the chart)
BRCM (Broadcom--$74.13; -10.87; optionable):
STATUS: BRCM came crashing back down as the big techs took it on the chin Friday. The stock closed back near its pre-rate-cut low of 72.38, hitting down to 71.06 at its low. The stock has been rolling with this level at the lower end of the range, but we will see whether it holds here again. If it does, we can look at BRCM as a long-term buy as it moves back up, taking partial positions with stock as it makes it way back, adding positions as it builds strength and levels of support hold strong and ultimately breaks out.
BUY POINT: After holding here, a move back up, looking at bigger volume (down to 13 million Friday, about average).
POSITION: Stock.
http://www.investmenthouse.com/cd/brcm.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.
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us stock market
trading strategy
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