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us stock market, trading system
Begin Part 2 of 2
TEAM TRADES
SGR: Shaw Group is one of our new leaders that is really leading. It had formed a 7-week cup pattern that saw a breakout to a new high seven sessions ago but on just average volume. We like to see those breakouts on a substantial increase in value. Well, pulling back right to the breakout point late last week and finding support on the 18 day MVA, we were interested. Also, it showed a nice volume spike last Thursday as it made a solid move up. Those volume spikes are key in showing us that there is a lot of buying interest.
With that in our back pocket, SGR was one of the stocks we were looking for this week: leading stock in a leading sector and looking ready for a new high. Today it got right on board and started up. We were tempted to jump right in, but in this market there is that conundrum: do I get in right away or do I wait for the stronger move? If I wait, will it be over at that point?
We split the difference. Whenever we get those type of choices we often buy a little now and then a little later. We like SGR and we were looking for stock positions. It opened and ran to 51.75 in the first 20 minutes. We were looking for a pullback, but after holding steady for 10 minutes it started back up. When it did we were already putting in an order. The spread was 51.65 by 51.94. We put a limit order in at the ask, and after seeing it bounce from there to 51.90 to 51.86, but the fill came at 51.94. Hmmmm. The stock then ran to 53.50 and started a sideways consolidation. We saw strength in the NYSE, and we were interested in more positions if it cleared the early high. We set a buy stop at 53.65. The stock moved up and the fill was at 53.64. It was showing excellent volume and moved up to right at 55 for the close. Solid move by a solid stock.
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.
Best Plays: We like all the plays we put on the Daily, but these we are really focusing on for the next session.
1) BBBY: Moving up toward a breakout.
2) TSS: Ditto.
3) WCNX: Looking for a bounce.
4) JNY: Another retail stock looking ready to break to a new high.
5) USON: Formerly covered and breaking out.
6) SGR: Breaking out.
7) MERQ: A possible downside play.
8) PKI: Still below the 200 day MVA, but showing some life.
New Stocks:
Looking for retail stocks to make some strong moves on a rate cut:
BBBY (Bed Bath & Beyond Inc--$26.75; +0.94; optionable (BHQ)): Home Furnishing Stores
STATUS: A well-known retailer that is heading up the last two days on stronger volume (reaching 3.76 million Monday; avg. 3.77 million). The stock moved up from a test of the 10 day MVA on the low of 25.88, moving up to close just under resistance levels at 26.81, then at 27.13 (each hit three times recently). If volume can break above average, the stock can make a stab at 27.81, last Tuesday's high. The stock is in a 16-week base that has formed a volatile handle that has dipped twice, first to the 18 day MVA, then to the 50 day MVA last week. Money flow is strong, and relative strength has moved out ahead of price, a bullish indicator.
BUY POINT: 27.94, volume of 5.6 million or better. A buy on a breakout up to 29.34.
POSITION: Stock and/or May $25 calls to buy (BHQ EE).
http://www.investmenthouse.com/cd/bbby.html
(Click to view the chart)
http://biz.yahoo.com/p/b/bbby.html
A small stock that trades on lighter volume (less than 100,000 average), but good earnings ranking and good accumulation:
TSS (Total System Services--$24.13; +0.53; optionable (TSS)): Business Software
STATUS: In a pennant pattern that has formed above the stock's 10 day MVA (currently at 23.81) though price dipped back below that level the last four days of the previous week. TSS moved back over that level Monday on stronger volume (48,300; avg. 58,545), up from a Thursday test of lower support at the 23 level. Look for a breakout over the pattern high of 24.63. The stock shows outstanding money flow and a relative strength that has moved out ahead of price (bullish).
BUY POINT: 24.76, on volume of 79,000 or better.
POSITION: Stock and/or May $22.50 calls to buy (TSS EX).
http://www.investmenthouse.com/cd/tss.html
(Click to view the chart)
http://biz.yahoo.com/p/t/tss.html
WCNX (Waste Connections Inc--$30.13; -0.62; optionable (NBU)): Materials & Construction
STATUS: Pulled back to support (10 day MVA) on low volume (127,400; avg. 368,590). Throughout February the stock has shown a pattern of pulling back to this moving average, then making two bounces the latter moving higher than the first) on successively stronger volume. WCNX is in an 8-week cup base. Look for a bounce back up on stronger volume. The stock shows outstanding buying and money flow.
BUY POINT: Aggressive: On a move up from here on rising volume. Breakout: 33.19, on volume of 553,000 or better.
POSITION: Either position: Stock and/or July $30 calls to buy (NBU GF).
http://www.investmenthouse.com/cd/wcnx.html
(Click to view the chart)
http://biz.yahoo.com/p/w/wcnx.html
Updates:
JNY (Jones Apparel--$39.86; +2.10; optionable (JNY)): Apparel Clothing
STATUS: Covered February 20. Making a good-looking move on its second day coming off the 50 day MVA (36.37). This is the stock's second bounce this month from that moving average. Price closed just under resistance at 39.99 (hit 4 times in recent weeks), but we are looking for a continued rally to break the stock over the February high of 40.38. The stock shows great buying and money flow, and relative strength has broken out ahead of price (bullish).
BUY POINT: New high: Over 40.38, on above average volume.
POSITION: Stock and/or May $40 calls to buy (JNY EH).
http://www.investmenthouse.com/cd/jny.html
(Click to view the chart)
http://biz.yahoo.com/p/j/jny.html
KLAC (Kla-Tenor Corp--$42.31; -1.07; optionable (KCQ)): Semiconductor Equipment
STATUS: On the weekend report, and still looking good on a lower-volume pullback (to average levels, 7.1 million). The stock remains above the 10 and 18 day MVAs (41.41 and 41.17), the low testing just above the 50 day MVA at 40.38, as it moves in a pennant pattern just below its 200 day MVA (44.71). Looking for a bounce back from the lower support level for a move up toward breakout. Pattern high is 48.69. The stock shows good buying and a relative strength that has moved ahead of price, a bullish indicator. Money flow is strong as well.
BUY POINT: Aggressive: From the 41 range (short term MVAS) on above average volume. Breakout: 49.99, on continued strong volume (minimum breakout volume 8.6 million).
POSITION: Aggressive: Stock and/or June $40 calls to buy (KCQ FH). 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
USON (Us Oncology Inc--$10.06; +0.62; optionable (QIA)): Specialized Health Services
STATUS: Covered February 12 and 21. The stock is breaking out of the handle of its lengthy base, closing just under the buy point of 10.13. Volume was strong at 1.5 million (avg. 699,000) and relative strength broke out ahead of price. Looking for the true breakout as price hits and moves beyond the buy point. Outstanding buying and money flow.
BUY POINT: 10.13, on continued strong volume (minimum breakout volume is 1 million or more). Remains a buy on the breakout up to 10.64.
POSITION: Stock and/or June $10 calls to buy (QIA FB).
http://www.investmenthouse.com/cd/uson.html
(Click to view the chart)
http://biz.yahoo.com/p/u/uson.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:
CPN (Calpine Corp--$46.37; +2.87; optionable (CPN)): Electric Utilities
STATUS: Made the move we were looking for, but on a gap over the 10 day MVA (44.82), which put the stock back in the range of the former consolidation (a short ranging pattern that was moving laterally as the stock tested a recent breakout move). Volume was higher at 3.9 million (avg. 4.3 million), but impossible to play without just buying right in. Look for a continued move as volume breaks above average. On a pullback, likely support is at the 10 day MVA (44.82) if the stock does not hold in the 46 range (the opening price, 45.70, was hit 3 times recently). CPN has remained above its down trendline. The February high is 48.80.
BUY POINT: Aggressive: On further upward movement on above average volume. Pullback: Up from the 45.70 or higher on above average volume.
POSITION: Aggressive: Stock and/or July $45 calls to buy (CPN GI).
http://www.investmenthouse.com/cd/cpn.html
(Click to view the chart)
NATI (National Instruments Cp--$52.25; -0.06; optionable (SJQ)): Computer Peripherals
STATUS: Holding above its 10 day MVA (52.10) after Friday's lower-volume move up. Volume dropped even further below average (130,500; avg. 270,000), so we like the hold at support, especially since the stock dropped to a low of 49.75 but recovered. Look for a move up from here as the rally continues. High money flow and relative strength, good buying.
BUY POINT: On a move up from here on volume of 176,000 or better.
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)
SGR (The Shaw Group Inc--$54.91; +4.60; optionable (SGR)): Manufacturing: Industrial Equipment & Components
STATUS: Got the shot of volume for the breakout after the low-volume pullback, passing resistance at the 52 level, and the previous high of 53.70. The stock looks good for a continued move up as the market rallies. This stock is packing in the good buying, high money flow, and relative strength.
BUY POINT: Aggressive: On further upward movement on continued rising volume. Stop loss 49.
POSITION: Stock and/or July $50 or calls to buy (SGR GJ). July $55 options have 3 open interests (SGR GK).
http://www.investmenthouse.com/cd/sgr.html
(Click to view the chart)
UP & COMERS PORTFOLIOS:
EXDS, TQNT, BVSN, SANM, PKI and GMST for now.
PKI (Perkinelmer Incorporated--$78.69; +3.31; optionaable (PKI)): Diversified Services: Technical Services
STATUS: The stock is now trading below the 200 day MVA (85.51) for a week, but made a nice move up Monday on a pop up in volume (908,800; avg. 555,818). The stock can head up to its 10 day MVA (81.98) or, in an extended rally, to the 18 and 200 day MVA's at 85.14. Look for continued strong volume on the move up.
BUY POINT: Up from here on stronger volume. Watch the 82 level for possible resistance, though the 18 day MVA in conjunction with the 200 day MVA will be the level that can stop the stock, especially if the market turns around.
POSITION: Stock. June $75 options have no open interests (PKI FO).
http://www.investmenthouse.com/cd/pki.html
(Click to view the chart)
MEMBER PORTFOLIO: BRCM, CHKP, CSCO, EMLX, IDTI, INTC, JDSU, MVSN, NT, PWER, SUNW, VTSS
No reports on this portfolio tonight.
Covered Call or Put Plays: We are looking at a few stocks that may set up for a move back down if the market cannot follow through on the rally. MERQ looks ready for an immediate turn down; AOL, VRTS and CIEN may take another day or so depending upon the market (and its reaction to a rate cut or no rate cut).
MERQ (Mercury Interactive Corp--$72.38; +2.32): Software
http://biz.yahoo.com/p/m/merq.html
STATUS: After a nice move up Friday, MERQ encountered resistance at its down trendline (73, connecting September, November and December closing highs), showing a doji at that level today. Volume was down but still solid at 3.7 million (average 3.37 million), and we will see if MERQ drops back off of this doji back to the November and January lows (58-60) in its recent rolling range. The 10 day MVA adds to the resistance at 72.78. Today the stock hit a low of 66.50, at an early February low. If the stock can manage a move over the trendline, it also faces some possible resistance at its 18 day MVA (75.80)
BUY POINT: On a run back down from here on continued good volume.
POSITION: March $70 calls to sell (RQB CN), and/or March $75 or July $75 puts to buy (RQB OO and RQB SO, respectively).
AOL (America Online--$46.12; +2.82; $46.12; +2.82; optionable (AOO)): Media
http://biz.yahoo.com/p/a/aol.html
STATUS: The stock heaved up from a Friday doji to close just under its 10 day MVA (46.31), moving up most of the day despite the lower volume (14.9 million, avg. 17.8 million). The stock just broke above the 50 day MVA (simple, 46.08). Because of that support and the fact that it was simply a low volume day throughout the market, AOL can move up to the 18 day and 50 day MVAs (47.22 and 47.41, respectively), but that resistance can be tough to beat if volume isn't strong enough, especially with a short term down trendline there as well. Thus, the stock may set up for a move back down from the upper resistance level, especially if the rally fizzles.
BUY POINT: On a move back down from the 47 - 48 level on stronger volume.
POSITION: July $50 puts to buy (AOO SJ).
OEX (Standard & Poors 100--$655.80; +13.16; optionable (OEY)):
http://biz.yahoo.com/p/o/oex.html
STATUS: Moved up on lower volume (1.12 million; avg. 1.2 million). The 10 day MVA is at 666, and it also has to deal with its down trendline at that level as well. On a continued move up to the level as the index rallies, these can pose resistance if the market rolls over, offering a put play on a move back down.
BUY POINT: On a move down from the 666 level on rising volume.
POSITION: March $670 puts to buy (OEY CN).
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 system
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