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world stock market, understanding the stock market
Begin Part 2 of 3
Support and Resistance
Nasdaq: Closed at 1199.16
Resistance: The August down trendline at 1218. The 10 day MVA (1225.66). 1230 and 1250 are price resistance points. The 18 day MVA (1248.42). 1270 is still more price resistance from the September lows. The March/May downtrend line at 1292 along with price resistance at 1300. 1316, an early August interim high. The 50 day MVA (1309.93). 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 1372. 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). 1177ish is some support. There is price support from 1080 to 1100. Then there is a big shelf of support at 1050 down to 1000.
S&P 500: Closed at 827.37
Resistance: 850 to 855 (the October 1997 and Q2 1998 lows) stopped things Friday. The 10 day MVA (850.03). The 18 day MVA (864.73). The March downtrend line at 867. 875 is price resistance of some significance. The 50 day MVA (897.97). July and August interim highs at 911.64. The September 2000/May 2001 downtrend line at 923. The downtrend lines from the March and April highs (933). Price resistance at 950. 965, the September 2001 closing low.
Support: The first bottom channel line in the March downtrend (826). Some price support at 800. The lowest channel line in the March downtrend channel (790). 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 7701.45
Resistance: The lowest bottom channel line of the March downtrend (7840). The 10 day MVA (7972.04). The August lows (8043) and the September 2001 intraday low (8062). The 18 day MVA (8130.21). The September closing low at 8235.81. 8250 acted as resistance before after acting as support. The March down trendline at 8270. The 50 day MVA (8474.05). Some price resistance at 8500. 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 July low (7532.66). The October 1998 lows are at 7400 and 7467. After that is 7000, some 1997 lows and highs.
Economic Calendar
9-30-02
Personal income, August (8:30): 0.5% expected, 0.0% prior.
Personal spending, August (8:30): 0.5% expected, 1.0% prior.
Chicago PMI, September (10:00): 53.0 expected, 54.9 prior.
10-01-02
Auto sales, September: 6.1M expected, 6.6M pior.
Truck sales, September: 7.8M exepcted, 8.8M prior.
ISM index, September (10:00): 51.0 expected, 50.5 prior.
Construction spending, August (10:00): -0.1% expected, 0.0% prior.
10-03-02
Initial claims (8:30): 406K prior.
ISM Services, September (10:00): 51.4 expected, 50.9 prior.
Factory orders, August (10:00): -1.5% expected, 4.4% prior.
10-04-02
Nonfarm payrolls, September (8:30): 15K expected, 39K prior.
Unemployment Rate, September (8:30): 5.9% expected, 5.7% prior.
Average workweek, September (8:30): 34.1 expected, 34.1 prior.
Hourly earnings, September (8:30): 0.3% expected, o.3% prior.
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SUBSCRIBER QUESTIONS
Q: I bought 100 September 35 C puts at $1.25 back when C hit $36.01. Even though you indicated a put buy on C around $30, I sold my position at $2.15. Do you know these options actually hit a high of $11.00 at one point after that! I would like to know from an obvious expert, you, how do you hold onto the bloody end? I took a $10,000 profit but missed another $90,000! Am I a chicken, normal or just too emotional to play this game? Do you ever "get nervous" and sell out too soon? You held your C position I see, but what happened to me?
A: Everyone, regardless of who they are and years of experience, gets some nerves every once in awhile on a play. The key is sticking with the trend in place or the move you are investing in and looking at the signals from the market as it moves up and down and the stock as it does the same to see if the trend is changing. If you have confidence in your understanding of the market by reading the signposts then you have confidence to stay in the play and reap the big profits. It takes discipline, becoming that machine to act when it is necessary to act but not to have 'happy feet' and jump out of positions too fast. It is definitely a learned trait; you have to force yourself to stick by your plan as long as an honest evaluation of the conditions tells you the trend is still in place. Try this: ask yourself 'are all the attributes I looked for when I entered this play still in place?' If so, there is no real reason to get out. With options you have the time consideration as well; as long as your time on your options is still good you can stick with the play.
THE PLAYS:
NEW BONUS PLAYS:
Upside:
DL (Dial Corp.--$21.60; -0.07; optionable): Don't you wish everyone used it?
http://biz.yahoo.com/p/d/dl.html
STATUS: Cup (w/handle?). DL is moving in a 4.5-month cup base, and after a very strong move off of the 50 day MVA Tuesday, DL took a rest Friday, showing a tight doji on lower volume. This could be where it starts to form a handle in the pattern. Accumulation is solid at 7 up weeks on rising volume to 3 down weeks on rising volume. Relative strength is also breaking out on the move. Consumer products had a very rough end of the week but DL held up extraordinarily well. The good accumulation is supporting it. Now we let the stock form the handle over what could be some rough sessions for the overall market early in the week and then attempt the breakout. As you have seen of late, the stronger stocks are holding up when the rest of the market sells off, putting the last touches on their bases. Then when the market rallies again they are ready to make the breakout moves. We will see if DL is that caliber as well. Thus far it has the credentials.
Volume: 614.6K Avg Volume: 609.531K
BUY POINT: $21.84 Volume=712K Target=$25.55 Stop=$20.31
POSITION: DL AD - Jan. $20c (74 delta) and/or Stock
http://www.investmenthouse.com/cs/dl.html
RGLD (Royal Gold--$18.36; +0.25; optionable): Gold mines
http://biz.yahoo.com/p/r/rgld.html
STATUS: Testing breakout/18 day MVA (17.59). RGLD is testing the 18 day MVA for the first time after its breakout in early September. Gold stocks pulled back last week as the market attempted the mid-week rally. Gold stocks tend to move inversely to economic times, rising when poorer times are forecast, falling when better times are ahead. They have been rising, another indication of the concern over the world economic recovery. This first test of the 18 day MVA is a favorite point of ours to take positions on breakouts; it shows the move is holding and as stocks typically make 4 to 5 runs up the 18 day MVA after a breakout, the first test is a good place to initiate or add to positions. Accumulation in the stock since the base started in May is 6 up weeks on rising volume to 2 down weeks on rising volume.
Volume: 424.563K Avg Volume: 409.048K
BUY POINT: $18.65 Volume=575K Target=$22.35 Stop=$17.34
POSITION: MJQ AC - Jan. $15c (65 delta) and/or Stock
http://www.investmenthouse.com/cs/rgld.html
Downside:
$OEX (S&P 100 options 413.22; =15.29; optionable)
http://biz.yahoo.com/p/$/$oex.html
STATUS: Put. The 10 day MVA proved much to much for the large caps and turned it Friday. Volume was not horrid, but these rollovers from resistance in a downtrend don't need a lot of volume to start. The selling was steady, and without some really positive news the next leg down in this downtrend is underway. We are looking at a conservative target first as we want to see how the OEX handles the July closing low (396.75). The intraday low was all the way down to 385, so if stocks are tumbling at the target we will let it continue lower.
Volume: 8.793M
BUY POINT: $411 Target=$395 Stop=$415
POSITION: OXB WC - Nov. $415p (-46 delta) or OXB JC - Oct. $415p (-48 delta)
http://www.investmenthouse.com/cs/$oex.html
JCI (Johnson Controls--$77.3; -1.91; optionable): Auto parts
http://biz.yahoo.com/p/j/jci.html
STATUS: Put. Testing the 18 day MVA (79.42). Despite the strong auto sales (new reports to be released this week), JCI tumbled in mid-September and made a lower volume rebound late last week. Friday it gave a classic sign it was out of gas, tapping the 18 day MVA on the high and rolling over to close lower on rising, above average volume. While auto sales remain at sold levels due to the 0% financing, we are hearing from some that even the low financing is not getting as many into the showroom. Again, it is a cyclically slow time for the economy after the kids get back to school and before the holidays.
Volume: 640.6K Avg Volume: 602.444K
BUY POINT: $77.05 Volume=625K Target=$73.55 Stop=$80
POSITION: JCI WP - Nov. $80p (-59 delta)
http://www.investmenthouse.com/cs/jci.html
MBI (MBIA, Inc.--$40.1; -2.13; optionable): Surety and title insurance
http://biz.yahoo.com/p/m/mbi.html
STATUS: Put. Even with the continued strong housing market, title insurance is under pressure along with most stocks related to the housing industry. When markets continue down despite some solid numbers it is a very clear indication that something is afoot and you are well advised to take note. In any event, MBI tested its 10 day MVA (41.96) and rolled over hard Friday with volume spiking back above average as it continues its downtrend from late June. MBI can easily fall $5 to $6 on these drops after testing resistance, so there is still good downside here even being conservative particularly with the good delta and relative low option price.
Volume: 1.14M Avg Volume: 874.082K
BUY POINT: $39.98 Volume=1M Target=$36.73 Stop=$42.25
POSITION: MBI WI - Nov. $45p (-74 delta)
http://www.investmenthouse.com/cs/mbi.html
CONTINUING BONUS PLAYS
Downside:
Play Date: 09/10/2002
ACAS (American Capital--$18.27; -0.06; optionable): Financial services
http://biz.yahoo.com/p/a/acas.html
STATUS: Put. Testing the 10 day MVA (18.41) Thursday and Friday, both days failing to hold a move over that MVA. ACAS looks ready to start yet another move lower in the downtrend, moves that typically take it down $3.50 before it rallies to test the resistance again. We like these clockwork downside plays. We are going to let it move through 18 as that may try to provide some support.
Volume: 1.219M Avg Volume: 892.461K
BUY POINT: $17.97 Volume=900K Target=$14.95 Stop=$19.22
POSITION: DQS WX - Nov. $22.50p (-69 delta) or DQS WD - Nov. $20p (-57 delta)
http://www.investmenthouse.com/cs/acas.html
Play Date: 09/25/2002
CLX (Clorox--$41.06; -1.69; optionable): Consumer cleaning products, etc.
http://biz.yahoo.com/p/c/clx.html
STATUS: Put. Starting the breakdown after rallying Wednesday and Thursday on light volume to test back up to the 200 day MVA (42.36). Friday it ignored the PG news and rolled down on rising, above average volume. Still very much a buy as it just crossed the buy point Friday.
Volume: 1.179M Avg Volume: 1.143M
BUY POINT: $41.25 Volume=1.2M Target=$37.25 Stop=$42.35
POSITION: CLX MI - Jan. $45p (-69 delta)
http://www.investmenthouse.com/cs/clx.html
Upside:
APPX (American Pharmaceutical--$16.75; -0.12; no options): Drug manufacturer
Play Date: 09/19/2002
http://biz.yahoo.com/p/a/appx.html
STATUS: Cup w/handle. Friday was another session where APPX showed a doji, this time testing the 10 day MVA on the low (16.40) as volume spiked massively higher. After Thursday's action we like this a lot more. Now we are looking for that high volume to carry it up and over the breakout this coming week. Drugs are up and down, but some of the smaller drugs are being used as a safe haven as the market gets a bit ugly again. Accumulation is solid at 8 up weeks on rising volume to just 4 down weeks on rising volume.
Volume: 574.8K Avg Volume: 159.733K
BUY POINT: $17.11 Volume=225K Target=$20.55 Stop=$15.85
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/appx.html
BSX (Boston Scientific--$31.48; +1.49; optionable): Medical instruments
Play Date: 09/12/2002
http://biz.yahoo.com/p/b/bsx.html
STATUS: Breaking out. Starting the breakout move from a 13-week cup w/handle base, BSX enjoyed a solid move up at the end of the week as the market started to waffle. Again, that safe haven aspect of some health services stocks. It surged to the breakout point Friday on some continued solid volume; volume was super the last three days of the week, and it is important to note overall volume, not just day-to-day volume. The stock is in great shape with good accumulation at 4 up weeks on rising volume to 2 down weeks on rising volume. Still a buy on this move.
Volume: 3.346M Avg Volume: 2.142M
BUY POINT: New positions: 31.65 (orig. $30.94). Volume=3.3M Target=$35.58 Stop=$28.77
POSITION: BSX AY - Jan. $27.50c (70 delta) and/or Stock
http://www.investmenthouse.com/cs/bsx.html
PRE-ANNOUNCEMENT PLAYS
CECO (Career Education--$46.74; -1.14; 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: Tried to make a further move early Friday, but it was pushed back on rising volume, giving back most of the solid Thursday move. Still in very good shape, and after some market weakness early in the week we will look for CECO to move back up and give another buy point. Excellent accumulation in the pattern at 7 up weeks on rising volume to just 3 down weeks on rising volume.
Volume: 771.06K Avg Volume: 697.929K
BUY POINT: New buys: 48.25 (orig. $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
EDMC (Education Management--$43.43; -1.56; 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. Wednesday saw a good breakout from the short ascending wedge at the end of the reverse head and shoulders pattern. The test back Friday held above the 10 day MVA (42.83). Volume was below the breakout volume but remained solid. Needs to hold here to keep the breakout in tact, though the stock is still in very good shape. We were looking for a test of 44 for new positions; it undercut that some.
Volume: 465.503K Avg Volume: 351.394K
BUY POINT: New positions: 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
End Part 2 of 3
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world stock market
understanding the stock market
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