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trading strategy, top stock pick
Begin Part 3 of 3
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) PRGO: Getting ready to make another move up after testing a breakout.
2) APOG: Moving up on stronger volume after a breakout test.
3) OCLR: And another test of a breakout that looks good.
4) JBL: The doji suggests a roll back up from here on a good shot of volume.
5) CTXS: Back over the 50 day MVA on good volume.
6) LLL: We always like lower-volume pullbacks to support.
7) SGR: Ditto.
8) A couple of trading plays: PMCS, BRCM
New Stocks:
PRGO (Perrigo Co--$10.00; -0.19; no options): Drug Related Products
STATUS: This small stock has been moving up very nicely (in a very long base) since hitting a low near 5 in April of last year. It broke out of a long base in January, and recently made a breakout move from an ascending wedge that formed as a test of the breakout (buy was 9.38). The stock failed to hold that move, and pulled back for further consolidation, continuing to hold Friday above its 10 day MVA (9.96) after testing on the low support at the 18 day MVA (9.78). Looking for a move back up on the strong volume momentum established Friday (393,900; avg. 272,454). Excellent money flow and buying.
BUY POINT: Over the recent high of 10.31 on continued rising volume.
POSITION: Stock.
http://www.investmenthouse.com/cd/prgo.html
(Click to view the chart)
http://biz.yahoo.com/p/p/prgo.html
APOG (Apogee Enterprises Inc--$8.97; +0.09; no options): Materials & Construction
STATUS: Moving up the right side of a lengthy 19-month base after hitting bottom last June at 3.25. Just broke out of a cup with handle at the bottom of that larger base, and is moving up after testing above its buy point (8.13) on Friday's low of 8.19. Volume was stronger on the move up, at 188,800 (avg. 107,227). Looking for another breakout over the Wednesday (breakout) high of 9.50. The stock shows strong buying and steadily improving money flow. The stock was up slightly at the close of after hours trading.
BUY POINT: Over 9.50 on continued rising, strong volume.
POSITION: Stock.
http://www.investmenthouse.com/cd/apog.html
(Click to view the chart)
http://biz.yahoo.com/p/a/apog.html
OCLR (Ocular Sciences Inc--$16.25; -0.25; optionable (QLO)): Medical Instruments & Supplies
STATUS: In a 13-month base (prior high 23.44) and currently testing a breakout from a cup with handle at that base's bottom. The test is another handle forming as the stock readies to break out over its April high of 18.50. Breakout high is 17.25, and the stock is pulling back in an ordered manner as volume continues to drop lower and lower (reaching 95,200 Friday; avg. 101,636). Moved up from the 10 day MVA (15.97) where the stock opened, so looks ready to move if it gets higher volume from here. Good buying.
BUY POINT: Breakout: 18.63, on volume of 152,000 or better. A buy on the breakout up to 19.56.
POSITION: Stock and/or July $15 calls to buy (QLO GC).
http://www.investmenthouse.com/cd/oclr.html
(Click to view the chart)
http://biz.yahoo.com/p/o/oclr.html
Updates:
A couple of rolling stocks:
NITE (Knight Trading Group Inc--$16.50; -0.38; optionable (QTN)): Investment Brokerage
STATUS: Looks ready to roll back up to 22-23 (perhaps higher; the stock on its last roll up reached a peak at the 24 level) after moving back down for the last three weeks. The stock showed its fourth consecutive doji, each drifting just lower than the previous, Friday's low testing near the November low (15.63). The stock hit 15 four times in December, so it can pull back to that level before heading back up, though the doji nearer the high (16.80) suggests a move back up.
BUY POINT: On a move back up from here or 15, on stronger volume, for a run up to 22-23.
POSITION: Stock and/or July $15 calls to buy (QTN GC).
http://www.investmenthouse.com/cd/nite.html
(Click to view the chart)
http://biz.yahoo.com/p/n/nite.html
JBL (Jabil Circuit Inc--$25.38; +0.24; optionable (JBL)): Electronics: Printed Circuit Boards
STATUS: The stock put in three consecutive dojis at the end of the week at the 25 level, a possible bottom to the move down from the February high (40.99) that spanned three weeks. This is the second movement in this range. January lows are at the 21 level, tested on the lows Thursday and Friday as the stock closed higher. Volume remained below average during the pullback, even as the dojis closed at the tops of the intraday trading ranges. Looking for a roll back up to 36-38, near the December highs.
BUY POINT: Up from here on stronger volume (Friday's volume was lower at 2.1 million; avg. 4 million).
POSITION: Stock and/or June $25 calls to buy (JBL FE).
http://www.investmenthouse.com/cd/jbl.html
(Click to view the chart)
http://biz.yahoo.com/p/j/jbl.html
Other updated stocks:
KLAC (Kla-Tenor Corp--$43.38; +2.38; optionable (KCQ)): Semiconductor Equipment & Materials
STATUS: Consolidating in a pennant that has upward resistance at the 200 day MVA (44.75). The pattern formed after the stock hit a January high of 48.69 at the peak of a good-looking uptrend from the November low of 25.56. Friday the stock powered up from a low of 38.75 to break resistance at the 50 day and short term moving averages (the latter resistance just below the opening price of 41.16). Good volume the last three days of the week. KLAC is readying for a breakout over the 200 day; it can pull back to support again before heading out, but with the good buying and relative strength that has moved ahead of price (in addition to improving money flow), things look pretty good.
BUY POINT: Aggressive: Over 45 on rising volume. Breakout: 49.99, on continued strong volume (minimum breakout volume 8.6 million).
POSITION: Aggressive: Stock and/or June $45 calls to buy (KCQ FI). Breakout: Stock and/or June $45 or $50 calls to buy (KCQ FI or KCQ FJ).
http://www.investmenthouse.com/cd/klac.html
(Click to view the chart)
http://biz.yahoo.com/p/k/klac.html
CTXS (Citrix Systems Inc--$30.50; +1.12; optionable (XSQ)): Internet Software
STATUS: After hitting a January high of 37.19, CTXS made its way down over the next three weeks to a February low of 27.81 (Thursday), but found some strength Friday as volume kicked up to 6.88 million (avg. 5 million). Price moved back over the 50 day MVA (30.05), pulling off a high of 31.44 that tapped the 18 day MVA. We are looking for the stock to test the 50 day MVA early in the week and head up from there in a continued rally. Some resistance at 32.
BUY POINT: Over the intraday high of 31.44 on continued strong volume.
POSITION: Stock and/or May $30 calls to buy (XSQ FF).
http://www.investmenthouse.com/cd/ctxs.html
(Click to view the chart)
http://biz.yahoo.com/p/c/ctxs.html
SRCL (Stericycle Inc--$39.38; +0.63; optionable (URL)): Materials and construction
STATUS: In a well-performing sector with earnings out Monday after the bell. The stock is in a short 8-week base (previous high 42.25) and on stronger volume is trying to break over the Wednesday high of 39.38 (251,000; avg. 174,545). Price moved up from support at the 38 level (where it opened Friday). It is unusual to see stocks break out of cups without handles, so on a pullback into a handle, look for support at 38, or lower at 37.25. Everything looks good here: strong money flow and buying, and relative strength is high and ahead of price, a bullish sign.
BUY POINT: Aggressive: Up from here on continued rising volume. Pullback: On a move back up from 37.25 or better, on continued strong volume.
POSITION: Aggressive: Stock and/or May $35 calls to buy (URL EG).
http://www.investmenthouse.com/cd/scrl.html
(Click to view the chart)
http://biz.yahoo.com/p/s/scrl.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.
New Leaders: ACS, CPN, SGR, ESRX, NATI, LLL
Previous Leaders: ADBE, AMCC, ARBA, BEAS, BRCD, CIEN, EMC, EXTR, GLW, JNPR, NEWP, NTAP, PMCS, SCMR, SEBL, VRSN, VRTS,
New Leaders:
NATI (National Instruments Cp--$52.31; +2.62; optionable ( )): Computer Peripherals
STATUS: After tumbling below its 50 day MVA Wednesday (50.11), the stock tapped near 48 for three days on its lows, then at the close of trading Friday got a shot of volume that popped it back over its short term moving averages. The volume surge was not intense (on the day, volume was down at 281,600; avg. 270,000), but we look for the stock to hold support here in a stronger rally. It was a recovery that broke through several resistance levels, so we'll see what happens early in the week as the rally continues on the possibility of a rate cut. The stock hit a February closing high of 56.13, and is trending up the right side of its 42-week base (from a May low of 31.88). Outstanding money flow and high relative strength (that has broken out ahead of price, a good indicator that the stock will be moving up). Buying looks good.
BUY POINT: On a move up from here on above average volume.
POSITION: Stock and/or June $50 calls to buy (SJQ FJ). These options have only 57 open interests.
http://www.investmenthouse.com/cd/nati.html
(Click to view the chart)
LLL (L-3 Communications--$85.35; -0.75; optionable (LLL)): Telecom Equipment
STATUS: Got the pullback to the 18 day MVA (83.13) as we possible, then the stock pulled back up at the end of the day to close at higher support, the 10 day MVA (84.99), which has served LLL well since early January. Volume was lower on the move at 393,900 (avg. 353,000), what we like to see on such pullbacks. The stock is bouncing up and down in a trading range above the 10 day MVA as it consolidates for a break to a new high. Previous closing high of 88.26 was posted February 15.
BUY POINT: Aggressive: On a move up from here on rising volume. Break to a new high: Over 88.26, on volume of 532,000 or better.
POSITION: Stock and/or July $85 calls to buy (LLL GQ; 62 open interests).
http://www.investmenthouse.com/cd/lll.html
(Click to view the chart)
SGR (The Shaw Group Inc--$50.31; -0.69; optionable (SGR)): Manufacturing: Industrial Equipment & Components
STATUS: After Thursday's pop up from the 18 day MVA on stronger volume, the stock tested that level again Friday on the low of 48.85, but headed back up to close above the 10 day MVA (49.72). Another low-volume pullback to support, the stock will be ready to move when it gets a good shot of volume. SGR hit a high of 53.70 Tuesday, and looked ready to head higher after Thursday's action, but needed a bit more consolidation. Continued good buying, high money flow and relative strength that continues to move out ahead of price. Watch for potential resistance at the 52 level.
BUY POINT: Aggressive: On a move up from here on above average volume.
POSITION: Stock and/or July $50 calls to buy (SGR GJ).
http://www.investmenthouse.com/cd/sgr.html
(Click to view the chart)
Previous Leaders:
A trading play:
PMCS (Pmc-Sierra Inc--$49.94; +2.81; optionable (SQL)): Electronics: Semiconductor, Integrated Circuits
STATUS: One of the few chip stocks that showed stronger volume (12.5 million; avg. 10.3 million). The stock moved up after testing its most recent bottom on the low of 43.56 (the stock hit 44 twice last week), just like it has done the last three days. A trading play with a target at the 18 day MVA (59.21) in a continued rally. The 10 day MVA is at 52.94. The stock has trended downward since early September. Up slightly at the close of after hours trading.
BUY POINT: On a move up from here on continued strong volume.
POSITION: Stock and/or May $45 or $50 calls to buy (SQL EI, 81 open interests, or SQL EJ, 576 open interests).
http://www.investmenthouse.com/cd/pmcs.html
(Click to view the chart)
A Covered Call or Put Play:
CIEN (Ciena Corporation--$74.50; +5.37; optionable (UEE)): Telecommunications: Processing Systems & Products
STATUS: Moved up on lower volume (23.6 million; avg. 16.2 million), which remains high and above average. The stock can continue up to its 10 day MVA (76.91), but on a turn back down from there can drop back to 70 or lower (February low is 65.75). On that move we can consider covered calls on long-term stockholdings and/or puts.
BUY POINT: On a move down from the 76-77 level, on stronger volume.
POSITION: March $75 or $70 calls to sell (UEE CO or CN), and/or May $80 puts to buy (UEE PP).
http://www.investmenthouse.com/cd/cien.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 trading play:
BRCM (Broadcom Corp--$69.44; +4.75; optionable (RDZ)): Electronics: Semiconductor, Integrated Circuits
STATUS: Moved up on stronger volume the last two days of the week (16.1 million by Friday; avg.13.3 million), after tapping a low near 60 both days. The stock is looking good for a trading play up to the 10 day MVA (74.42) as first resistance and then to the 18 day MVA (82.15). BRCM was turned back down from the 10 day six days ago on above average (lower than that of Friday) volume, so watch that level for resistance. We will be ready to play the stock back down to 60 if it makes it to the 10 day MVA and the rally then fails.
BUY POINT: On a move up from here on continued strong and rising volume.
POSITION: Stock and/or May $65 or $70 calls to buy (RDZ EM or RDZ EN).
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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trading strategy
top stock pick
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