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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:
Best Plays:
1) GSK: Setting up for another move down.
2) WEN: Likewise.
3) COCO: Ready for another break to a new high.
4) LEXR: Nice accumulation.
5) APOL: Looks ready again.
6) PRX: Tightening up for a breakout.
7) CUB: Setting up for more downside.
8) GDW: Ditto.
NEW PLAYS
Downside:
GSK (Glaxosmithkline--$36.45; +1.27; optionable): Drug manufacturer
http://biz.yahoo.com/p/g/gsk.html
STATUS: Put. After a big move lower in its continuing downtrend, GSK gapped higher Friday but could not attract the upside volume as it die the selling volume as it tanked. The move left it below the 10 day MVA (37.32) and we look for the stock to resume its fall from here once it clears some support at 36.
Volume: 1.404M Avg Volume: 1.144M
BUY POINT: $35.95 Volume=1.5M Target=$32 Stop=$37.35
POSITION: GSK WH - Nov. $40p (-67 delta)
http://www.investmenthouse.com/ct/gsk.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/ct/stj.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/ct/wen.html
Upside:
$OEX (S&P 100 options--$63.92; -0.88; optionable)
http://biz.yahoo.com/p/$/$oex.html
STATUS: Relief bounce. We anticipate the indexes to bounce after 8 sessions of selling, and we are simply looking to pick up some of that gain. It is a quick and aggressive play, but it is anticipating the market's recent pattern to make us some nice and easy money.
Volume: 14.195M
BUY POINT: $424.45 Target=$438 Stop=$419
POSITION: OXJ JD - Oct. $420c (56 delta)
http://www.investmenthouse.com/ct/$oex.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 (we are already in APOL) 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/ct/coco.html
GLG (Glamis Gold--$10.1; -0.13; no options): Gold mining
http://biz.yahoo.com/p/g/glg.html
STATUS: Cup w/handle. 4-month base. Forming a handle just over the former highs, GLG is working along the 10 day MVA (9.94) with strong money flow and relative strength. Accumulation in the base is solid, and gold stocks are providing a safe haven in pre-war times, forming solid bases and looking for the breakout. That is the key here: the stock needs to breakout on good volume.
Volume: 705.5K Avg Volume: 853.818K
BUY POINT: $10.59 Volume=1.3M Target=$12.75 Stop=$9.45
POSITION: Stock (no option chain)
http://www.investmenthouse.com/ct/glg.html
LEXR (Lexar Media--$4.10; +0.12; no options): Photo equipment
http://biz.yahoo.com/p/l/lexr.html
STATUS: Cup w/handle. LEXR is working on a 2-month base, now forming the handle above the short term moving averages. Money flow is way out ahead of the stock price and accumulation in this base is positive at 3 up weeks on rising volume to 2 down weeks on rising volume; a simple majority is all it takes to tip the scales in favor of accumulation and a breakout. A breakout will not put the stock at an all-time high, but it will pt it at a 2 year high with plenty of room on the upside. At the price we don't have to get a lot of movement to make a very good percentage gain. If it runs we will let it run and work for us, but we need to have initial targets to work off of.
Volume: 247.575K Avg Volume: 495.181K
BUY POINT: $4.31 Volume=650K Target=$5.15 Stop=$3.95
POSITION: Stock (no option chain)
http://www.investmenthouse.com/ct/lexr.html
PDCO (Patterson Dental--$51.77; +0.12; optionable): Wholesale medical equipment
http://biz.yahoo.com/p/p/pdco.html
STATUS: Cup w/handle. WE are calling this a cup with handle though it rallied in August almost to the old high before correcting again. In any event the process is the same. It is now working its way in a new handle just off the pre-correction high , and we want to see another few sessions of handle formation on some lower volume. The volume has been up on this move, though the price/volume action is still solid. Normally in a handle you want to see volume back off on the move to low levels; it is backing off but is not very light. In any event we like the action and will look for the breakout.
Volume: 627.016K Avg Volume: 371.5K
BUY POINT: $53.21 Volume=557K Target=$61.25 Stop=$49.49
POSITION: DOU AJ - Dec. $50c (57 delta) or DOU AI - Dec. $45c (73 delta) and/or Stock
http://www.investmenthouse.com/ct/pdco.html
UNTD (United Online--$10.8; +0.67; no options): Internet software
http://biz.yahoo.com/p/u/untd.html
STATUS: Test 50 day MVA. We are looking at this play as a trade up to the recent August high at 13. UNTD has been erratic the past five months though it has remained up at the top of its range. This recent pullback from the high has been on substantially below average volume, but the stock has shown two volume spikes the past three sessions. Strong money flow and accumulation (5 up weeks on rising volume to 3 down weeks on rising volume) along with the volume spikes indicate the stock looks ready for a trade up to the previous high.
Volume: 779.24K Avg Volume: 680.5K
BUY POINT: $11.03 Volume=800K Target=$13.35 Stop=$10.26
POSITION: Stock (no option chain)
http://www.investmenthouse.com/ct/untd.html
CONTINUING PLAYS:
Upside:
AMLN (Amylin Pharmaceuticals--$13.9; +1.5; optionable): Drug Mftr.
Play Date: 09/18/2002
http://biz.yahoo.com/p/a/amln.html
STATUS: Cup w/handle. Big breakout Friday as LLY announced it was taking a stake in AMLN. Huge volume and it is good news for the stock though it sold back after the big gap higher. We anticipate the stock to test back to near the breakout point at 13.55 (note how it hit that level on the low Friday and bounced) one more time for another entry point.
Volume: 7.238M Avg Volume: 550.5K
BUY POINT: New positions: on a test of $13.55 and a move back up. Volume=750K Target=$16.25 Stop=$12.45
POSITION: AQM AB - Jan. $10c (77 delta) and/or Stock
http://www.investmenthouse.com/ct/amln.html
APOL (Apollo Group--$42.49; -0.01; optionable): Education and training
Play Date: 08/15/2002
http://biz.yahoo.com/p/a/apol.html
STATUS: APOL continues to win for us and is now forming a very tight, lateral consolidation along the 10 day MVA, testing the 18 day MVA on the lows (41.80). Still solid accumulation and great money flow. Education is hot and we are looking for this group to deliver some more breakouts as they are one of the market leading groups right now. Check out CECO and COCO as well.
Volume: 2.703M Avg Volume: 2.28M
BUY POINT: New positions: 43.55 Volume=3.3M Target=$50 Stop=$41.50
POSITION: AKA KY - Nov. $36.625 c (75 delta) and/or Stock
http://www.investmenthouse.com/ct/apol.html
CENT (Central Garden & Pet--$15.62; -0.64; optionable): Wholesale industrial equipment
Play Date: 09/12/2002
http://biz.yahoo.com/p/c/cent.html
STATUS: Cup w/handle. Still moving in the handle of the 3-month base, forming a near perfect handle on very low volume. Accumulation is excellent and money flow is shooting up ahead of the move. Still looks super.
Volume: 129.15K Avg Volume: 138.59K
BUY POINT: $16.15 Volume=300K Target=$18.15 Stop=$14.94
POSITION: EQH KV - Nov. $12.50c (82 delta, low OI) and/or Stock
http://www.investmenthouse.com/ct/cent.html
PRX (Pharmaceutical Resources--$27.98; +0.69; optionable): Generic drugs
http://biz.yahoo.com/p/p/prx.html
STATUS: Ascending wedge. PRX moved up off the 10 day MVA (27.38) Friday, but was unable to generate the volume; not quite there yet. It is still working through a 3-month ascending wedge base, and is tightening up at the end of the pattern. Good accumulation in the pattern at 3 up weeks on rising volume to just one down week on rising volume.
Volume: 209K Avg Volume: 311.5K
BUY POINT: $28.91 Volume=525K Target=$34.65 Stop=$26.89
POSITION: PRX KE - Nov. $25c (71 delta) and/or Stock
http://www.investmenthouse.com/ct/prx.html
PSS (Payless Shoes--$56.49; -0.13; optionable): Shoes
Play Date: 09/11/2002
http://biz.yahoo.com/p/p/pss.html
STATUS: Testing the breakout. PSS gave us the sharp move higher earlier in the month, and now it is testing that move, coming back to the 10 day MVA (56.66) on very low, below average volume. It is important to see the pullbacks on low volume as that shows there are very few overall sellers. Yes the sellers are pushing it lower, but compared to the number of buyers they are miniscule. That means it is the short term profit takers at work. Once they are gone there are only those that want to hold the stock. Then demand outstrips supply and off it goes again. That is what we are looking for here for the next move up.
Volume: 222.5K Avg Volume: 297.5K
BUY POINT: $58.08 Volume=500K Target=$64 Stop=$55.45
POSITION: PSS LK - Dec. $55c (60 delta) and/or Stock
http://www.investmenthouse.com/ct/pss.html
Downside:
CUB (Cubic Corp.--$19.22; +0.55; optionable): Scientific and technical
Play Date: 09/18/2002
http://biz.yahoo.com/p/c/cub.html
STATUS: Put. Friday CUB tried to make a bold move, gapping up to the 18 day MVA at 20. It then rolled over and gave most of the gain back. Volume was higher, but that is more short covering and then rollover volume after the initial euphoria. This stock is looking ripe for another rollover at this point for new positions.
Volume: 109K Avg Volume: 104.727K
BUY POINT: New positions: $18.98 Volume=85K Target=$16 Stop=$21
POSITION: CUB MX - Jan. $22.50p
http://www.investmenthouse.com/ct/cub.html
GDW (Golden West Financial--$62.55; +1.61; optionable): Savings and loan
Play Date: 09/21/2002
http://biz.yahoo.com/p/g/gdw.html
STATUS: Put. A current play that is working well. GDW rallied Friday, but this was a test higher on lower volume in a continuing downtrend. It has first resistance at the 10 day MVA (63.26), and that is where we expect it to fall. It hit up near that level the last two sessions but could not hold the move. ON a roll back over here we are looking at adding positions. New positions can be taken at that point.
Volume: 725.4K Avg Volume: 666.09K
BUY POINT: $62.29 Volume=675K Target=$58.55 Stop=$63.85
POSITION: GDW WM - Nov. $65p (-55 delta)
http://www.investmenthouse.com/ct/gdw.html
SY (Sybase--$12; -0.05; optionable): Application software
Play Date: 09/19/2002
http://biz.yahoo.com/p/s/sy.html
STATUS: Put. SY was able to hold at 12 on Friday, not giving much of a test higher. Volume moved even higher above average, and we anticipate it will attempt a bounce early this week before rolling over at or just below 13. The play is on a move back down from that test.
Volume: 782.9K Avg Volume: 634.772K
BUY POINT: After a test of 13: $12.75. From here: 11.95. The options are inexpensive so that is plenty of room to make some good money. Volume=680K Target=$10 Stop=$13.55
POSITION: SY XV - Dec. $12.50p (-50 delta)
http://www.investmenthouse.com/ct/sy.html
End Part 2 of 3
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us stock market
understanding the stock market
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