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us stock market, understanding the stock market
Begin Part 2 of 3
Support and Resistance
Nasdaq: Closed at 1221.09
Resistance: 1230 and 1250 are price resistance points. 1270 is more price resistance from the September lows. The August down trendline at 1255. The 10 day MVA (1262.43). The 18 day MVA (1281.89) and price resistance at 1300 are also in play. 1316, an early August interim high. The March/May downtrend line at 1315. The 50 day MVA (1333.71). The late July high (1354.48) and 1357.09, the October 1998 bear market low. There is another downtrend line from the March and May highs at 1390. 1418, the interim test after the September low. That is followed by price resistance at 1500.
Support: Price support from 1190 to 1200 (the July intraday low is 1192.42). After that it gets really fuzzy. You have prices at 1080 to 1100. That takes you back to 1996 levels.
S&P 500: Closed at 845.39
Resistance: 850 to 855 (the October 1997 and Q2 1998 lows). 875 is price resistance of some significance. The March downtrend line at 876. The 10 day MVA (874.68). The 18 day MVA (886.51). July and August interim highs at 911.64. The 50 day MVA (911.88). The September 2000/May 2001 downtrend line at 926. The downtrend lines from the March and April highs (939) along with price resistance at 950. 965, the September 2001 closing low. Then 1000 is psychological resistance.
Support: The first bottom channel line in the March downtrend (839). The lowest channel line in the March downtrend channel (800) along with price support at that level. Then the July low at 775.68 and marks the culmination of the short head and shoulders pattern. 750 to 760 with an intraday touch to 730.
Dow: Closed at 7986.02
Resistance: The August lows (8043) and the September 2001 intraday low (8062). The September closing low at 8235.81. 8250 acted as resistance and sent the Dow lower in the last hour. The 10 day MVA (8239.95). The 18 day MVA (8362.30). The March down trendline at 8365. Some price resistance at 8500. The 50 day MVA (8619.13). The late July interim high at 8762.14 (8745 closing). A range of resistance from 9000 on up to 9050. Then 9250 and then 9500.
Support: The lowest bottom channel line of the March downtrend (7935). Then the July low (7532.66). The October 1998 lows are at 7400 and 7467. After that is 7000, some 1997 lows and highs.
Economic Calendar
9-23-02
Leading Economic Indicators, August (10:00): -0.1% expected, -0.4% prior.
9-24-02
Consumer Confidence, September (10:00): 95.0 expected, 93.5 prior.
FOMC meeting results, 2:15
9-25-02
Existing home sales, August (10:00): 5.35M expected, 5.33M prior.
9-26-02
Durable goods orders, August (8:30): -1.8% expected, 9.2% prior.
Initial jobless claims (8:30): 420K expected, 424K prior.
New home sales (10:00), August: 990K expected, 1.017M prior.
FOMC minutes, 8-13 meeting (2:00)
9-27-02
GDP Q2 final (8:30): 1.2% expected, 1.1% prior.
Michigan Sentiment revised (9:45): 86.2 expected, 86.2 prior.
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THE PLAYS:
NEW BONUS PLAYS:
Upside:
PSUN (Pacific Sunwear--$23.79; +0.57; optionable): Sportswear
http://biz.yahoo.com/p/p/psun.html
STATUS: Double bottom w/handle. PSUN, as with many retailers, is not giving in. It is in a 3-week handle to its 5.5 month base. The handle has been pretty much what you would ask for, trending slightly lower intraday on predominantly lower volume. Accumulation in the base is positive at 5 up weeks on rising volume to 4 down weeks on rising volume; all it takes is a simple majority to tilt the pattern toward accumulation and a strong breakout. Relative strength is already breaking out ahead of the move as PSUN gave a preview Friday with a run up over 24 on some rising, average volume. The buyers are there, so we will see if a rally this week can give PSUN the breakout.
Volume: 1.1M Avg Volume: 998.818K
BUY POINT: $24.47 Volume=1.5M Target=$28.15 Stop=$22.76
POSITION: PVQ CX - Mar. $22.50c (66 delta) and/or Stock
http://www.investmenthouse.com/cs/psun.html
LANC (Lancaster Colony--$43.89; +0.62; no options): Housewares
http://biz.yahoo.com/p/l/lanc.html
STATUS: Testing the breakout. LANC blasted out of its base and to a new high in early September. Volume on the move up has been solid all month, and excellent sign of support for the stock. The breakout was from a 2.5 month cup base that showed accumulation of 4 up weeks on rising volume to 3 down weeks on rising volume. A strong relative strength breakout accompanied the move, another sign of strong support. This is the first test of the breakout, and it tapped the 18 day MVA on Friday's low (43) before it bounced on sharply higher, above average volume. We love to pick up stocks off their first tests of the breakout, and in a healthy stock they usually occur at the 18 day MVA.
Volume: 319.307K Avg Volume: 169.5K
BUY POINT: $44.25 Volume=254K Target=$50.88 Stop=$41.15
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/lanc.html
Downside:
NLS (Nautilus--$27.70; -1.36; optionable): Sporting goods, fitness equipment
http://biz.yahoo.com/p/n/nls.html
STATUS: Put. NLS bought Direct Focus, the marketers of the Bowflex. That stock made us some great money in 2001, but in this market what worked in the past may not work in the future as discussed in the summary. After trying to consolidate above its simple 50 day MVA (29.33), NLS broke down Friday on a spike in volume. It has not been healthy for a long time after peaking in May, and now it looks ready to work its way down to the July lows below 24. We expect the stock to make a token test back toward the 50 day MVA and then fall from there. That is our favorite entry point, but we are also willing to take positions on further falling from here because in this market stocks that start to breakdown sometimes do not get a second chance.
Volume: 868.3K Avg Volume: 621.59K
BUY POINT: $27.55 Volume=725K Target=$24 Stop=$28.75
POSITION: NLS MFS - Jan $30p (-51 delta)
http://www.investmenthouse.com/cs/nls.html
WEN (Wendys International--$32.57; +0.48; optionable): Burgers and fries
http://biz.yahoo.com/p/w/wen.html
STATUS: Put. The restaurant stocks are under pressure despite DRI's strong results. MCD is not doing that well and it is hurting the other burger joints. WEN keeps reporting strong results, but this former split candidate has been pounded the past three months. After touching down to 30 on the MCD news it has recovered up toward the 10 day MVA (32.71), but has done so on lower and lower volume. The 10 day MVA also coincides with its steep downtrend from August. That won't hold forever, but we are looking for WEN to roll over here or at the 18 day MVA at 33.55. We will move in for another downside run at that point.
Volume: 1.328M Avg Volume: 1.36M
BUY POINT: After a test of the 18 day MVA at 33.55, $32.75 on the way back down. Volume=1.6M Target=$30 Stop=$33.33
POSITION: WEN XG - Dec. $35p (-57 delta)
http://www.investmenthouse.com/cs/wen.html
CONTINUING BONUS PLAYS
APPX (American Pharmaceutical--$15.89; +0.04; no options): Drug manufacturer
http://biz.yahoo.com/p/a/appx.html
STATUS: Cup w/handle. Still in the handle of its 6-month base. Friday tested the 18 day MVA on the low (15.46) and sent the stock back up on some rising, average volume. This looks as if APPX is girding for the breakout from the handle this week. Again, drugs are acting as a safe haven of sorts in this market. Accumulation is solid at 8 up weeks on rising volume to just 4 down weeks on rising volume.
Volume: 164.864K Avg Volume: 144.227K
BUY POINT: $17.11 Volume=225K Target=$20.55 Stop=$15.85
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/appx.html
VWKS (Vitalworks--$8.05; +0.29; no options): Business software and services
http://biz.yahoo.com/p/v/vwks.html
STATUS: Cup w/handle. Still in the handle of its 4.5 month base. The handle is getting a bit stretched out, but has held above the 50 day MVA (7.66). Volume dropped to very low levels last week, but then started back up Thursday and Friday as the stock moved up off the 50 day. It has recovered and looks ready to make the move, but we have to see the high volume breakout we want.
Volume: 290.533K Avg Volume: 462.227K
BUY POINT: $8.45 Volume=890K Target=$10.25 Stop=$7.86
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/vwks.html
NEW PRE-ANNOUNCEMENT PLAYS
CECO (Career Education--$45.69; +0.85; optionable): Forecast to announce a split on 10-31-02 in conjunction with earnings. At this time the company cannot confirm a date but based upon our research this is the date for the release.
http://biz.yahoo.com/p/c/ceco.html
BACKGROUND: Last announced a 2 for 1 split on 7-31-01 in conjunction with earnings. The stock price was $61. The annual shareholder meeting was on 5-17-02 at which time no additional shares were authorized. The company has sufficient shares for 2 for 1 split.
STATUS: Career education is hot, and CECO is moving above the 50 day MVA (44.15) in a pattern similar to another education pre-split candidate, EDMC. Accumulation is excellent in the pattern at 7 up weeks on rising volume to just 3 down weeks on rising volume. Relative strength is breaking out already given the stock's strength in this market. CECO has been one of our former pre-announcement, pre-split, etc. plays, and after the July shakeout it looks ready to make another breakout to a new high with the caveat that the whole market does not go into meltdown as it did in July. A solid, solid performer that is under accumulation once again.
Volume: 465.551K Avg Volume: 687.863K
BUY POINT: $46.55 Volume=700K Target=$53.53 Stop=$43.29
POSITION: CUY AH - Jan. $40c (70 delta) and/or Stock
http://www.investmenthouse.com/cs/ceco.html
PRE-ANNOUNCEMENT PLAYS
EDMC (Education Management--$42.24; +0.77; optionable): Education and training. Forecast to announce a split on 10-24-02 in conjunction with earnings. At this time the company cannot confirm this date, but based upon our research this is the date for the announcement.
http://biz.yahoo.com/p/e/edmc.html
BACGROUND: Last announced a 2 for 1 split on 12-2-98 at a stock price of $46. The annual shareholder meeting was on 11-8-01 at which time no additional shares were authorized. The company has sufficient shares for a 2 for 1 split.
STATUS: Reverse head and shoulders. Continues to form the right shoulder of the pattern as EDMC trades up off the 50 day MVA (40.63), showing good price/volume action as it does. Money flow remains strong, and of course relative strength is breaking out as the stock moves up in a market that is falling. Still looking for that high volume breakout to send it up on its next leg.
Volume: 249.277K Avg Volume: 347.409K
BUY POINT: $44.03 Volume=520K Target=$49.45 Stop=$40.95
POSITION: UKN LH - Dec. $40c (65 delta, low OI) and/or Stock
http://www.investmenthouse.com/cs/edmc.html
CONTINUING CANDIDATES
AZO (Autozone--$75.85; +1.07; optionable): Auto parts is parts
http://biz.yahoo.com/p/a/azo.html
STATUS: Ascending wedge. AZO is ever so close to making the breakout, using the 50 day MVA as its low point in the pattern. Thursday and Friday it was bouncing higher on some rising though still below average volume. Money flow is zooming out ahead of the move and relative strength is breaking out. It looks ready to run to give us the play at least up to the former high. Given the stock price and the move we are looking for here, we are using options on this play to leverage our way into the stock and get a very nice return on that move.
Volume: 1.074M Avg Volume: 1.191M
BUY POINT: $75.69 Volume=1.5M Target=$82.55 Stop=$71.25
POSITION: AZO LN - Dec. $70c (64 delta) and/or Stock
http://www.investmenthouse.com/cs/azo.html
HSIC (Henry Schein--$53.1; +0.35; optionable): Wholesale medical equipment
http://biz.yahoo.com/p/h/hsic.html
STATUS: Test 18 day MVA. Still on the 18 day MVA, HSIC is poised for its second bounce off of that level after its breakout. Stocks typically climb up the short term MVA's 4 to 5 times before going back to test the 50 day MVA. This second test is a perfect place to pick up positions for that next bounce. The stock has been giving about $4 on these bounces, a great return on options. On stock positions we ride the stock up for a few more bounces.
Volume: 327.746K Avg Volume: 424.5K
BUY POINT: Aggressive: 53.25. Breakout: 54.50 (orig. $52.05). Volume=550K Target=$59.85 Stop=$50.15
POSITION: HQE AI - Jan. $45c (74 delta) and/or Stock
http://www.investmenthouse.com/cs/hsic.html
PRE-SPLIT
EASI (Engineered Support--$57.75; +0.92; optionable): Defense. Splitting 3:2 on Oct. 31 (Boo!)
http://biz.yahoo.com/p/e/easi.html
STATUS: Testing the breakout. Still testing the breakout, holding above the 10 day MVA on the close (57.58). This is the first test since its breakout, and it is a good entry point as discussed with HSIC. Again it is a market leader in the right sector at the right time and the split adds to that momentum.
Volume: 216.25K Avg Volume: 205.681K
BUY POINT: $58.95 Volume=304K Target=$66 Stop=$56.25
POSITION: UFE KL - Nov. $55c (70 delta) and/or Stock
http://www.investmenthouse.com/cs/easi.html
POST-SPLIT
CHS (Chicos Fas--$18.00; 0.00; optionable): Apparel
http://biz.yahoo.com/p/c/chs.html
STATUS: Cup w/handle. Looking very solid here in the handle as CHS tested the 18 day MVA (17.84) and shows a doji. Third session in a row it has tested 17.67 on the low and rebounded. Friday volume was higher. We are looking for the breakout soon.
Volume: 812.1K Avg Volume: 1.238M
BUY POINT: $19.05 Volume=1.8M Target=$22.94 Stop=$17.72
POSITION: CHS BC - Feb. $15c (77 delta) and/or Stock
http://www.investmenthouse.com/cs/chs.html
COCO (Corinthian Colleges--$36.55; +0.36; optionable): Education
http://biz.yahoo.com/p/c/coco.html
STATUS: Ascending wedge. COCO is another education stock and is ready for a new all-time high as it climbs the 18 day MVA (35.88). We love this stock, but it is tough love: it has to earn our money for the next buy point, and that will be on a breakout on some strong volume.
Volume: 653.068K Avg Volume: 826.363K
BUY POINT: $38.11 Volume=809K Target=$42.75 Stop=$35.44
POSITION: UCS BF - Feb. $30c (74 delta) and/or Stock
http://www.investmenthouse.com/cs/coco.html
COH (Coach--$28.14; -0.39; optionable): Handbags, etc.
http://biz.yahoo.com/p/c/coh.html
STATUS: Cup w/handle. Still moving in the handle of a 4-month base as volume continues to drop just as it should in the handle as the weak holders sell out as the stock appears to stall at the pre-correction high. Friday showed a doji over the 18 day MVA (27.97). It is getting very close.
Volume: 544.5K Avg Volume: 983.863K
BUY POINT: $27.55 Volume=1.4M Target=$33 Stop=$28
POSITION: COH BE - Feb. $25 (77 delta) and/or Stock
http://www.investmenthouse.com/cs/coh.html
STJ (St. Jude Medical--$36.29; +1.41; optionable): Medical appliances
http://biz.yahoo.com/p/s/stj.html
STATUS: Put. Proof that not all stocks in a sector are strong. STJ sold off sharply two weeks back and is now making the recovery up to resistance, heading toward the 50 day MVA at 37.13. Friday showed some rising volume, but after such a selloff we attribute that to short covering. It still must contend with significant resistance ahead and we look for it to fail at the 50 day MVA. It may rally further up to that point, but if it fails here we will take positions on a move lower.
Volume: 1.537M Avg Volume: 1.237M
BUY POINT: $35.95 Volume=1.9M Target=$32.05 Stop=$37.35
POSITION: STJ MH - Jan. $40p (-54 delta)
http://www.investmenthouse.com/cs/stj.html
TVX (TVX Gold--$14.75; +0.04; optionable): Gold mining
http://biz.yahoo.com/p/t/tvx.html
STATUS: Cup w/handle. A very nice cup pattern formed after the split. Stocks often struggle right after a split, and a good base afterwards sets up further gains. TVX formed a 3-month cup and is now moving in the handle along the 10 day MVA (14.46) as volume drops to next to nothing. Accumulation in the base is excellent at 5 up weeks on rising volume to just 2 down weeks on rising volume. Relative strength is ready to breakout as it is higher than it was back in June when the stock was at a slightly higher price.
Volume: 50.7K Avg Volume: 457.909K
BUY POINT: $15.45 Volume=685K Target=$18.55 Stop=$14.25
POSITION: TVX BV - Feb. $12.50c (74 delta, no OI) and/or Stock
http://www.investmenthouse.com/cs/tvx.html
YUM (Yum! Brands--$28.1; +0.22; optionable): Restaurants
http://biz.yahoo.com/p/y/yum.html
STATUS: Put. YUM did not roll over Friday but managed a move back up to 28 on some rising volume. It is still struggling hard here, running in place. The higher volume was most likely due to short covering after the massive break below the 200 day MVA last week (29.01). We expect it to make another run toward 29 and then roll back over. If not, we will take positions from here.
Volume: 2.311M Avg Volume: 1.844M
BUY POINT: After at test of 29, 28.55 on the way back down. From here: $27.05 Volume=2.2M Target=$24 Stop=$29
POSITION: YUM MF - Jan. $30p (-65 delta)
http://www.investmenthouse.com/cs/yum.html
End Part 2 of 3
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us stock market
understanding the stock market
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