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understanding the stock market, trading system
Begin Part 2 of 3
Support and Resistance
Nasdaq: Closed at 1139.90
Resistance: The August down trendline at 1175. The July intraday low at 1192.42 and the 10 day MVA (1190.90). Then 1200 and the 18 day MVA (1216.28). 1230 and 1250 are price resistance points. 1270 is still more price resistance from the September lows. The March/May downtrend line at 1275 along with price resistance at 1300. The 50 day MVA (1285.43). 1316, an early August interim high. 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 1353. 1418, the interim test after the September low. That is followed by price resistance at 1500.
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 800.58
Resistance: The first bottom channel line in the March downtrend (813). The 10 day MVA (830.68). The 18 day MVA (845.96). 850 to 855 (the October 1997 and Q2 1998 lows) have stopped the action before. The March downtrend line at 854. 875 is price resistance of some significance. The 50 day MVA (884.14). July and August interim highs at 911.64. The September 2000/May 2001 downtrend line at 915. The downtrend lines from the March and April highs (925). Price resistance at 950. 965, the September 2001 closing low.
Support: Price support at 800, bolstered by the September 2000/January 2001 down trendline. The lowest channel line in the March downtrend channel (775). Then the July intraday 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 7528.40
Resistance: The lowest bottom channel line of the March downtrend (7745). The 10 day MVA (7792.84). The 18 day MVA (7945.65). The August lows (8043) and the September 2001 intraday low (8062). The September closing low at 8235.81. 8250 acted as resistance before after acting as support. The March down trendline at 8210. The 50 day MVA (8334.34). 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, at some 1997 lows and highs.
Economic Calendar
10-7-02
Consumer credit, August (2:00): $10.5B expected, $10.8B prior.
10-10-02
Initial jobless claims (8:30): 415K expected, 417K prior.
Wholesale inventories, August (10:00): 0.2% expected, 0.6% prior.
10-11-02
Retail sales, September (8:30): -0.9% expected, 0.8% prior.
Retail ex-auto (8:30): 0.2% expected, 0.4% prior.
PPI, September (8:30): 0.2% expected, 0.0% prior.
Core PPI (8:30): 0.1% expected, -0.1% prior.
Michigan sentiment, prelim, October (9:45): 85.3 expected, 86.1 prior.
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SUBSCRIBER QUESTIONS
Q: Where can I find the ranking of bullish advisors versus bearish advisors on a daily basis?
A: This is not available on a daily basis but is produced once each week. The information is compiled by Investors Intelligence and is released on Wednesday. You can find it in publications such as Investor's Business Daily.
THE PLAYS:
NEW BONUS PLAYS:
Upside:
CHD (Church & Dwight--$33.04; -0.26; no options): Consumer cleaning products
http://biz.yahoo.com/p/c/chd.html
STATUS: Cup w/handle. The consumer is all that is standing tall in the economy, and CHD is doing fine in a 5-month base showing solid accumulation at 5 up weeks on rising volume to 2 down weeks on rising volume. It peaked out just over 34 Wednesday and has drifted back to the 10 day MVA (32.90) on the Friday low. Volume has been above average the last two weeks and was up a bit on Friday. It may try the 10 day MVA again or even the 18 day MVA (32.56) during this market turbulence before it shakes out all of the sellers and is ready for the breakout.
Volume: 184.8K Avg Volume: 153.741K
BUY POINT: $34.35 Volume=225K Target=$39.75 Stop=$31.95
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/chd.html
Downside:
AGN (Allergan--$53.35; -1.9; optionable): Drugs, contact lens stuff
http://biz.yahoo.com/p/a/agn.html
STATUS: Put. AGN rallied off the lows down at 49 but slammed into the 50 day MVA (55.81) last week. It tried one more weak attempt at the 50 day Thursday but then rolled over Friday on mushrooming volume. It managed to close near the 10 day MVA (53.49) but this is the largest volume in 2 months on this reversal. Looks like a quick run to the recent lows.
Volume: 1.676M Avg Volume: 1.087M
BUY POINT: $53.15 Volume=1.1M Target=$50 Stop=$54.85
POSITION: AGN WK - Nov. $55p (-54 delta, low OI)
http://www.investmenthouse.com/cs/agn.html
RE (Everest Re Group--$53.55; -1.11; optionable): Accident & health insurance
http://biz.yahoo.com/p/r/re.html
STATUS: Put. RE has been moving in a range for the past 1.5 months. Friday it moved sharply below the 50 day MVA (54.94) on above average volume after volume selling on Wednesday. Insurance is under pressure and Congress obviously did not heed the President's request to get a terrorism bill passed Friday.
Volume: 562.3K Avg Volume: 557.756K
BUY POINT: $53.35 Volume=550K Target=$50 Stop=$55
POSITION: RE WK - Nov. $55p (-55 delta, no OI)
http://www.investmenthouse.com/cs/re.html
CONTINUING BONUS PLAYS
Upside:
AG (Agco Corp.--$23.28; -0.44; optionable): Farm machinery
http://biz.yahoo.com/p/a/ag.html
STATUS: Testing the breakout. After Thursday's big volume recovery AG took Friday off, testing close to the 10 day MVA on the low (22.43) before recovering. Volume backed off to below average after trading above average for three weeks. We look for AG to hold at the 10 day MVA, maybe the 18 day MVA at 22, before resuming the breakout move. Accumulation since March is solid at 9 up weeks on rising volume to 5 down weeks on rising volume.
Volume: 669.7K Avg Volume: 644.341K
BUY POINT: $24.21 Volume=750K Target=$28 Stop=$22.25
POSITION: AG BX - Feb. $22.50c (70 delta, low OI) and/or Stock
http://www.investmenthouse.com/cs/ag.html
DL (Dial Corp.--$21.56; -0.41; optionable): Soap and deodorant
http://biz.yahoo.com/p/d/dl.html
STATUS: Cup w/handle. Tried to make the breakout move Friday on the open, but the stock was not ready for the move. It needed another few sessions to work the handle, and it looks as if it will do that now. Accumulation is solid at 7 up weeks on rising volume to 3 down weeks on rising volume.
Volume: 517.5K Avg Volume: 523.916K
BUY POINT: $20.25 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
Play Date: 09/26/2002
IDXX (Idexx Labs--$31.48; -0.21; optionable): Diagnostic substances
http://biz.yahoo.com/p/i/idxx.html
STATUS: Cup w/handle. Held up very well in the Friday selling, showing a doji that tapped the 10 day MVA on the low (31.10) as volume backed off well below average. It still looks very ready to make the breakout.
Volume: 188.73K Avg Volume: 288.504K
BUY POINT: $32.11 Volume=468K Target=$36.75 Stop=$29.86
POSITION: IQX LF - Dec. $30c (61 delta) and/or Stock
http://www.investmenthouse.com/cs/idxx.html
INGR (Intergraph--$17.74; -0.41; optionable): System software
http://biz.yahoo.com/p/i/ingr.html
STATUS: Cup w/handle. Still forming the handle to its 4.5 month base. We like the base because it has used the 200 day MVA (16.15) as support and the accumulation is excellent at 5 up weeks on rising volume to 0 down weeks on rising volume. It sold back some Friday in the overall market selling, but volume was still below average in wide market selling, and it was able to hold in the handle well.
Volume: 208.952K Avg Volume: 314.118K
BUY POINT: $18.55 Volume=525K Target=$22.25 Stop=$17.12
POSITION: IGQ AC - Jan. $15c (74 delta, low OI) and/or Stock
http://www.investmenthouse.com/cs/ingr.html
Play Date: 09/24/2002
MBG (Mandalay Resort Group--$33.88; -0.26; optionable): Resorts and casinos
http://biz.yahoo.com/p/m/mbg.html
STATUS: Cup w/handle. Working on that next handle as the stock moves to the pre-correction high at 36. It is testing the 18 day MVA (93.01) on the lows and recovering each session. Accumulation is solid at 5 up weeks on rising volume to 3 down weeks on rising volume. Holding up very well as the rest of the market suffers. That is what the stronger stocks do.
Volume: 1.057M Avg Volume: 757.84K
BUY POINT: $33.51 Volume=1M Target=$38.55 Stop=$32
POSITION: MBG AF - Jan. $30c (75 delta) and/or Stock
http://www.investmenthouse.com/cs/mbg.html
NEW PRE-ANNOUNCEMENT PLAYS
HET (Harrahs Entertainment--$49.51; -0.04; optionable): Casinos, resorts. Forecast to announce a split on 10-22-02 in conjunction with earnings.
http://biz.yahoo.com/p/h/het.html
BACKGROUND: HET last announce a split in 1993. It split twice that year, 2:1 and then 3:2. Price was near $45 when those splits were announced.
STATUS: Cup. HET is in the midst of a 5.5 month pattern showing positive accumulation at 7 up weeks on rising volume to 6 down weeks on rising volume. It is nearing the pre-correction high at 51, and it is just about time for the stock to start forming the handle just below that former high. Friday it may have started, falling back intraday to test the 10 day MVA on the low (48.66) and rallying back as volume contracted. W would expect the stock to move laterally and lower toward 49 and 48 for a few sessions as volume contracts, and then give the breakout move.
Volume: 1.469M Avg Volume: 1.244M
BUY POINT: $50.7 Volume=1.8M Target=$58.75 Stop=$47.45
POSITION: HET BI - Feb. $45c (72 delta) and/or Stock
http://www.investmenthouse.com/cs/het.html
IGT (International Game Technology--$67.35; -1.47; optionable): Gaming electronics. Forecast to announce a split 10-23-02 in conjunction with earnings (company has not confirmed this date).
http://biz.yahoo.com/p/i/igt.html
BACKGROUND: IGT has never announced a stock split, but the gaming sector is performing well and the stock is near an all-time high, a leader in the market.
STATUS: Cup w/handle. IGT appears to be forming the handle to a 9-month base formed this year. It seems as things get worse economically, people turn more to distractions such as gaming. Accumulation in the pattern is just positive at 9 up weeks on rising volume to 8 down weeks on rising volume; all it takes is positive accumulation. Volume backed off toward the end of the week as IGT dropped back to the 18 day MVA on the overall market selling. If it is a strong stock it will hold at this level again and then give the breakout move on a market recovery.
Volume: 991.5K Avg Volume: 983.817K
BUY POINT: $70.95 Volume=1.2M Target=$80 Stop=$66.45
POSITION: IGT DN - April $70c (51 delta) or IGT AM - Jan $65c (61 delta) and/or Stock
http://www.investmenthouse.com/cs/igt.html
PRE-ANNOUNCEMENT PLAYS
MME (Mid-Atlantic Medical--$37.18; -1.28; optionable): Health care plans. Forecast to announce a split 11-6-02 after the close.
http://biz.yahoo.com/p/m/mme.html
BACKGROUND: MME has announced two prior splits in 1993 and 1994 at $35 and $40. For the first time since that time the stock is back at those price levels.
STATUS: Cup w/handle. MME tried the breakout move last week but Friday slipped back to the 10 day MVA on the low (36.70) on the low as the market sold. Volume shrank back to near average levels on the selling as MME fought off the selling in the overall market. Accumulation is solid at 3 up weeks on rising volume to just 1 down week on rising volume. We need to see some once again strong volume on the next move that breaks it out. A move over the June highs near 40 puts MME at an all-time high.
Volume: 477K Avg Volume: 522.376K
BUY POINT: $38.28 Volume=650K Target=$44 Stop=$35.6
POSITION: MME CF - Mar. $30 c (77 delta, low OI) OR MME CG - Mar. $35c (64 delta) and/or Stock
http://www.investmenthouse.com/cs/mme.html
CECO (Career Education--$45.49; -2.84; 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: The bear market was chewing on education stocks Friday, one of the remaining leadership groups. One of the laggards in the group (DV; take a look at its chart as it is in a downtrend where the leaders in the group are in an uptrend) announced crappy results (no real surprise), but in this shaky market even the super education stocks were hammered. CECO was dropped down below 42 on the low, but we let it run to recover above the 50 day MVA. Volume was strong but well off the Tuesday breakout volume. We are willing to let the stock recover here if it will; it showed a lot of buy side interest Friday after the plunge lower as institutions that were not dumping it piled into the stock. If this market selling blows over and the S&P 500 holds the line this could be a great entry point for CECO. Excellent accumulation in the pattern at 7 up weeks on rising volume to just 3 down weeks on rising volume.
Volume: 3.988M Avg Volume: 920.372K
BUY POINT: New buys: over 48 (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--$42.99; -1.34; 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/ascending wedge. EDMC received the same ungrateful treatment Friday, testing the 50 day MVA on the low (41.31) and then rallying back to close near the 18 day MVA (43.18). As with CECO, volume was strong but lower than Tuesday's breakout volume. A laggard in the group (DV) got some funds nervous. We are willing to see if EDMC can recover up over 44 this week. If the market stays in selling mode we may have to go ahead and exit. If it finds its bottom here this is a great chance for more EDMC.
Volume: 882.372K Avg Volume: 352.835K
BUY POINT: New positions: 44.05 (prior 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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understanding the stock market
trading system
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