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Begin Part 3 of 3

FAF (First American Corp--$33.82; +0.31; optionable (FAF)): Insurance
http://biz.yahoo.com/p/f/faf.html
STATUS: Moved up from the 10 day MVA (33.09), support on the test of the breakout from the pennant pattern (buy point was 33.01). Volume was lower (237,400; avg. 346,136), but the small move up regardless suggests the stock is ready to make a move up in the right conditions. Reached a breakout high of 35.49. Great money flow, and relative strength broke out higher.
BUY POINT: On a move up from here on rising volume for new and additional positions.
POSITION: Stock and/or April $30 calls to buy (FAF DF).

FRED (Fred's Inc--$23.81; -0.07; no options): Retail
http://biz.yahoo.com/p/f/fred.html
STATUS: Testing the recent breakout from its cup with handle. Breakout high is 26.25. The stock dropped back rather abruptly Wednesday, but volume was quite low, and FRED moved laterally the next two sessions, showing a star doji Friday. Volume is at 49,500 (avg.50,000). After the pullback, the star doji is a strong indicator of a change in direction. The stock is below the buy point of 24.01. Still shows excellent money flow and buying.
BUY POINT: Aggressive: On a move up from the doji on above average volume. Safer: Over the breakout closing high of 25.38 on volume in the range of 67,000.
POSITION: Stock.

PHCC (Priority Healthcare--$39.75; -2.19; optionable (UHP)): Drugs Wholesale
http://biz.yahoo.com/p/p/phcc.html
STATUS: Got a volume surge Thursday that took the stock to a new all-time closing high (41.94). The stock pulled back Friday on slightly lower but still strong volume (684,300; avg. 512,863), showing a doji above support (39.38, and the 10 day MVA, tested on the low of 38.63). The pullback is a bit farther back than we would like, but we will see what the doji offers. Relative strength remains ahead of price, which is bullish.
BUY POINT: Aggressive: Up from here on stronger volume. New high: On a move over 43 on volume in the range of 924,000.
POSITION: Aggressive: Stock and/or April $40 calls to buy (UHP DG, 13 open interests). New High: Stock. April $40 options have 28 open interests (UHP DH).

WEDGES, PENNANTS, and FLYING PLATEAUS (AND FLAGS): These are some of our favorite patterns as the moves can be explosive. In this market, however, we need to see the move on the breakout on strong volume.

Wedges:

New Play: A smaller stock that trades on decent volume.

RBNC (Republic Bancorp Inc--$12.69; +0.06; no options): Regional Banks
http://biz.yahoo.com/p/r/rbnc.html
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.

Pennants:

Continued Plays:

NEU (Neuberger Berman Inc--$82.09; -0.72; optionable (NEU)): Financial services
http://biz.yahoo.com/p/n/neu.html
STATUS: Another pattern that is requiring patience. Prices are tightening up in the tail of this pennant as volume drifts lower and lower (74,700; avg. 285,363) in a nice shakeout of stockholders. Relative strength has moved out ahead of price, a bullish sign, as we continue to watch for a breakout over the pattern's high of 85.69. Tight doji Friday after the move down. Strong money flow into the stock.
BUY POINT: Breakout: 85.82, on volume of 385,000 or better.
POSITION: Breakout: Stock and/or April $80 (NEU DP, no open interests) or April $85 (NEU DQ, 20 open interests) calls to buy.

EDS (Electronic Data Systems--$62.62; -0.43; optionable (EDS)): Software
http://biz.yahoo.com/p/e/eds.html
STATUS: Made the necessary pullback to support (10 day MVA, 61.74), the stock pulling back the last three days on steadily decreased volume (reaching 27.8 million Friday; avg. 2.27 million). The stock reached a high of 65.50 on its earnings breakout, and looks ready to attack that price on a punch back up in volume. Money flow and buying look good. Climbing the upper right side of its year-long base (previous high 76.69).
BUY POINT: Aggressive: On a move up from here on rising volume. Safer: Over 66 on volume of 3.7 million or better.
POSITION: Aggressive: Stock and/or June $60 calls to buy (EDS FL). Safer: Stock and/or June $65 (EDS FM).

PNC (Pnc Financial Svcs Grp--$73.88; +1.79; optionable (PNC)): Banking
http://biz.yahoo.com/p/p/pnc.html
STATUS: Took on a bit of selling as the week progressed, but after hitting the 50 day MVA Thursday (71.64) it looks as if the sellers have been shaken out and the stock surged back up over its 10 day MVA (73.56) as volume rushed in (1.46 million; avg. 1.1 million). The company announced a buyback of shares Friday morning, sparking the move. We will see if the news (and the great volume) carries the stock into its breakout.
BUY POINT: 75.94, on volume of 1.5 million or better. Remains a buy on the breakout up to 79.74.
POSITION: Stock and/or May $75 calls to buy (PNC EO).

BASING/TRADING RANGES:

New Plays:

Rolling Pattern:

WEBM (Webmethods Inc--$62.38; -1.68; optionable (UUW)): Business software
http://biz.yahoo.com/p/w/webm.html
STATUS: In a rolling pattern ranging between 94 and 62-64. Currently holding above the February low of 54.75 after gapping lower on the open Friday then moving up from there to close despite the day's pullback. Volume was lower at 1.3 million (avg. 1.2 million). Look for the stock to hold support above at 58 or above until volume rallies back in. 18 day and 50 day MVAs are at 73.92 and 69.16, respectively. Upgraded Friday by UBS Warburg.
BUY POINT: On a move up from here on stronger, above average volume.
POSITION: Stock and/or April $60 calls to buy; 40 open interests (UUW DL).

Continued New Plays:

BGEN (Biogen Inc--$71.25; +1.31; optionable (BGQ)): Biotechnology
http://biz.yahoo.com/p/b/bgen.html
STATUS: After a year-long base, BGEN appears to be making a move to build the right side of the pattern (prior high is 129). Most recently, the stock is testing a breakout move from a cup with (ragged) handle base of almost 6 months duration. After trying to hold support at 70, the stock gapped lower on Friday's open but on nice volume moved up from there, halting just below the breakout high of 72.50. Relative strength has broken out ahead of price, and the stock shows good buying. Looking for a momentum move.
BUY POINT: Aggressive: Up from here on continued rising volume. Safer: Over 75.63 (July high) on strong volume.
POSITION: Aggressive: Stock and/or April $70 calls to buy (BGQ DN). Safer: Stock and/or April $75 calls to buy (BGQ DO).

LOW (Lowe's Companies Inc--$56.50; -0.39; optionable (LOW)): Retail
http://biz.yahoo.com/p/l/low.html
STATUS: Showing a star doji on a pullback from the breakout high reached Wednesday (58) after the stock broke out of a cup with handle base (that is within its larger, 10-month base showing a previous high of 67.25). Volume was very strong on the recent breakout, pulling back slightly in the pullback and surging back up Friday (5.3 million; avg. 2.7 million). Look for a move up from here; 10 day MVA is at 54.48 and previous buy point is 55.11.
BUY POINT: On a move up from here on continued strong volume.
POSITION: Stock and/or April $55 calls to buy (LOW DK).

CERN (Cerner Corp--$58.81; -1.32; optionable (CQN)): Software
http://biz.yahoo.com/p/c/cern.html
STATUS: In a cup with handle that has a prior high of 64.44 (November and December), so it is a fairly short base. Completed the upper right side on a move up to the February high of 61.50, then pulled back Friday on lower volume (520,000; avg. 670,136), tapping near the 10 day MVA (57.03) on the low of 57.81. The stock can pull back toward that support before heading back up, but look for the breakout over the handle (February) high. Shows good buying and high money flow, and a relative strength that is ahead of price.
BUY POINT: 61.63, on volume of 1 million or better. Remains a buy on the breakout up to 64.71.
POSITION: Stock and/or June $60 calls to buy (CQN FL).

EFX (Equifax Inc--$32.20; 0.00; optionable (EFX)): Business services
http://biz.yahoo.com/p/e/efx.html
STATUS: In a cup with a pretty tight handle that is pulling back perfectly on steadily declining volume (216,00; avg. 395,636). Showed a tight doji Friday, up from the low of 31.97 which tested support at the 10 day MVA. Handle high is 33.08 for the breakout. Previous basing high in this 15-week base is 36.50. Relative strength has moved out ahead of price, a bullish sign.
BUY POINT: 33.21, on volume of 593,000 or better. Remains a buy on the breakout up to 34.87.
POSITION: Stock and/or April $30 calls to buy (EFX DF).

Continued Plays:

SWBT (Southwest Bancorp of Tx--$43.00; -0.25; optionable (ZRQ)): Regional banks
http://biz.yahoo.com/p/s/swbt.html
STATUS: Hanging in its pennant pattern that was disrupted on a bit of selling that broke price temporarily below the lower support (short term moving averages). The stock closed back over that level Thursday on better volume, which dropped back to pretty low levels Friday (78,900; avg. 241,000). Showing a tight doji at support, down from the high of 43.94. Look for a move up on a volume surge. Great money flow and high relative strength (out ahead of price).
BUY POINT: Breakout: 45.76, on volume of 325,000 or better.
POSITION: Stock and/or May $45 calls to buy (ZRQ EI).

DGX (Quest Diagnostics Inc--$107.35; -0.30; optionable (DGX)): Health services
http://biz.yahoo.com/p/d/dgx.html
STATUS: The stock is trying to repeat a November wedging-type consolidation that resulted in a breakout to a new closing high (143.06), and has done a pretty good job of it. Friday may have ended the bit of selling suffered toward the end of the week, with volume dropping back to 163,100 (avg. 455,045) and the chart showing a tight 'hammer' doji. That's a recipe for a move up, but we still need to see the stock break and hold above its 50 day MVA (111.05). Not done with this one yet.
BUY POINT: Aggressive: Up from here on stronger volume. Safer: Over 112, on increased volume of 220,000 or better.
POSITION: Aggressive: Stock and/or May $105 calls to buy (DGX EA; options have 14 open interests). Safer: Stock and/or May $110 calls to buy (DGX EB; options have only 9 open interests).

MAY (May Department Stores Co--$38.25; +0.14; optionable (MAY)): Retail
http://biz.yahoo.com/p/m/may.html
STATUS: Continues to crawl up the 10 day MVA (37.90) on low volume (down to 748,500; avg. 1.3 million) and showing a tight doji Friday. The stock is climbing the right side of its base (prior high 45), and is waiting for a volume surge to break it back over the recent high of 39.53. The recent consolidation formed after the stock dropped below the 18 day MVA (37.44) earlier in the month. Excellent money flow and decent buying. The company reported good earnings that met expectations (Feb. 15).
BUY POINT: Over 39.53 on volume in the range of 1 million.
POSITION: Stock and/or June $35 or $40 calls to buy (MAY FG or FH).

PPDI (Pharmaceutical Prod Dev--$54.88; +0.57; optionable (PJQ)): Health services
http://biz.yahoo.com/p/p/ppdi.html
STATUS: Moved up from support (10 day MVA, 52.02) Thursday after a two-day handle pullback in the 6-week cup base, and next session managed a slight move up on stronger volume (306,700; avg. 495,000). Handle high is 56.50, and on a volume surge, we are looking for the breakout. Previous high in the pattern is 58.75. The stock shows good buying, strong money flow and high relative strength.
BUY POINT: Breakout: 58.88, on volume of 743,000 or better. Remains a buy on the breakout up to 61.82..
POSITION: Breakout: Stock and/or April $55 calls to buy (PJQ DK; options have 36 open interests).

WB (Wachovia Corp--$67.09; +0.98; optionable (WB)): Regional banks
http://biz.yahoo.com/p/w/wb.html
STATUS: Continues to consolidate in the handle of its 36-week cup, repeating the move of the previous Friday, when the stock topped back over its 10 day MVA after opening below the 18 day MVA (currently at 66.81 and 66.41, respectively). Similarly, intraday highs tapped the 68 level, with volume slightly higher on the most recent move (867,100; avg. 918,863). We are looking for a breakout over the handle high of 69.36 (hit January 29) again. Relative strength has broken out ahead of price, a bullish indicator. The company announced shareholder approval of a previously announced merger between RSFC and Wachovia.
BUY POINT: 69.49, on volume of 1.3 million or better. Remains a buy on the breakout up to 72.96.
POSITION: Stock and/or April $65 or $70 calls to buy (WB DM or DN).

STE (Steris Corp--$18.71; -0.34; optionable (STE)): Health services.
http://biz.yahoo.com/p/s/ste.html
STATUS: Trying to break out of the handle of its 2-month base (prior basing high of 20.13) but two attempts to move past the handle high of 19.25 have failed as volume continues to drop back below average (162,900; avg. 269,090). The stock is holding above its 10 day MVA (18.21), pulling back slightly to show a doji at the top of its intraday range, but it usually moves to its 18 day MVA before a sharp bounce. That is at 17.62 right now. We are looking for a move out of this short 4-day trading range for the breakout or after a move laterally to test the 18 day MVA.
BUY POINT: 19.38, on volume of 404,000.
POSITION: Stock and/or June $17.50 calls to buy (STE FW).

FITB (Fifth Third Bancorp--$58.69; +0.94; optionable (FTQ)): Regional banks
http://biz.yahoo.com/p/f/fitb.html
STATUS: Dropped to the 50 day MVA (56.84) on the open, but broke back over the 10 day MVA (58.29) on better volume, back into the range of the continuing handle of the small double-bottom. Volume rose to 1.86 million (avg. 2.2 million). Look for a continued move up. Handle high is 59.50, with the recent high at 61.31. Strong money flow and good buying for this stock.
BUY POINT: Breakout: 59.63, on volume of 3 million or better. Remains a buy on the move up to 62.49.
POSITION: Stock and/or May $55 calls to buy (FTQ EK).

NCC (Nations City Corp--$27.55; +0.70; optionable (NCC)): Banking
http://biz.yahoo.com/p/n/ncc.html
STATUS: Broke below the 50 day MVA (27.12) Thursday, but recovered Friday as the stock saw a volume surge on news of management changes in the company (1.36 million; avg. 1.1 million). Still below the 18 day MVA (58.07) and in the handle of its 15-month cup base, we will see how far the new rise in volume carries the stock. Handle high is 30.31. Relative strength broke higher and money flow looks good.
BUY POINT: Breakout: 30.44, on volume of 1.7 million or better.
POSITION: Stock and/or April $30 calls to buy (NCC DF).

JPM (J.P. Morgan & Co--$51.99; +0.88; optionable (JPM)): Banking
http://biz.yahoo.com/p/j/jpm.html
STATUS: Finally relented and tested the 50 day MVA (51.06) on the low, then moved up from there to the resistance level (18 day MVA, 52.30). Volume was down slightly (7.36 million; remaining below the average of 9.9 million). After testing the 50 day, we want to see a decisive move back over the 18 day MVA to take the stock up from the base of this 13-day handle (handle high is 57.33). Relative strength has broken out ahead of price, a bullish sign.
BUY POINT: Aggressive: Over 53 (18 day MVA) on average or better volume. Breakout: 57.46, on volume of 14.8 million or better.
POSITION: Aggressive: Stock and/or June $50 calls to buy (JPM FJ). Breakout: Stock and/or June $55 calls to buy (JPM FK).

A Put Play:

OEX (Standard & Poors 100--$675.42; -13.08; optionable (OEY)):
STATUS: Moved down on stronger volume (1.2 million, just above average levels) from resistance at the 682 level where the index opened Friday. The low tapped the down trendline (connects September and December highs), but given the 6 distributions days the index has seen this month, we are looking at a put play on a move down from here on continued weakness early in the week. If it bounces at 670 we will have to kill the play, but we are playing this distribution we are seeing.
BUY POINT: Below 675 on continued rising volume.
POSITION: March $680 puts to buy (OEY OP).

Good Investing!
Your Technical Traders Report Team

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 in 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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