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us stock market, trade stock
Begin Part 2 of 3
Economic Calendar
10-29-02
Consumer confidence, October (10:00): 90.2 expected, 93.3 prior.
10-31-02
Q3 GDP, Prelim (8:30): 3.6% expected, 1.3% prior.
Employment Cost Index, Q3 (8:30): 0.9% expected, 1.0% prior.
Initial jobless claims (8:30): 405K expected, 389K prior.
Chicago PMI, October (10:00): 50.0 expected, 48.1 prior.
11-01-02
Auto sales, October: 5.7M expected, 5.5M prior.
Truck sales, October: 7.6M expected, 7.3M prior.
Unemployment rate, October (8:30): 5.8% expected, 5.6% prior.
Non-farm payrolls, October (8:30): -10K expected, -43K prior.
Hourly earnings, October (8:30): 0.3% expected, 0.3% prior.
Average workweek, October (8:30): 34.2 expected, 34.3 prior.
Personal income, September (8:30): 0.4% expected. 0.4% prior.
Personal spending, September (8:30): -0.2% expected, 0.3% prior.
ISM Index, October (10:00): 49.0 expected, 49.5 prior.
Constructoin spending, September (10:00): -0.3% expected, -0.4% prior.
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SUBSCRIBER QUESTIONS
Q: What is your view on these chip stocks such as KLAC AMAT and NVLS? Especially NVLS seems to be showing strength. Would you move in now at the current levels, or will there be a pretty sharp consolidation to bring the stocks back down to earth?
A: It is said that recoveries are led by financials and chips. Financials have been trying to pick up the pieces; most of the patterns for large banks at best can be described as double bottoms (e.g., BAC) though C has a very interesting consolidation ongoing. The chip stocks are not even that close. They have been roughed up. The best that can be said is that they are in building patterns, trying to claw their way out of the hole. That does not mean we cannot take advantage of the moves. When they reverse the trend, rally and then consolidate, they are ripe for another move up that can provide a great trade. NVLS has made a solid move and there is some resistance at 30. If it breaks through there it has upside to 35 with relative ease. KLAC is banging between 30 and 35, resistance there at 35. A move up to that level, some consolidation and a breakout over that level gives it room to the next significant level at 40. If either tests back to the bottom of the range on lower volume and starts back up, a trade in the range can be made. Not stocks in position to race to new highs with all of the overhead supply, but the can definitely be traded.
THE PLAYS:
Good moves: IDXX; VAR; WEDC
LEADER PLAYS: Splitting stocks are often market leaders and thus we do not just focus on them at points where they are expected to announce or before they actually split. They provide many opportunities to invest in them and this section is where we can look at some former split stocks and other stocks that are in good position to make us money.
Upside:
GSB (Golden State Bancorp--$36; +0.70; optionable): Savings & loan
http://biz.yahoo.com/p/g/gsb.html
STATUS: Double bottom w/handle. Moving in a 5-month base, GSB is part of the financial sector that is starting to show signs of life. The predominant pattern in the group is the double bottom as the financials have been yanked around with the selling. Now GSB has moved back up to the middle hump in the double bottom and is moving laterally, forming a lower volume handle over the past 7 sessions. The action mimics the larger indexes but the GSB price/volume action during that time has been good. Overall accumulation in the base is solid at 6 up weeks on rising volume to 4 down weeks on rising volume. Money flow is leading higher even as the price moves laterally, and Friday saw a very good volume surge as GSB moved up to the top of its handle/consolidation range. Looks ready.
Volume: 1.732M Avg Volume: 1.056M
BUY POINT: $36.12 Volume=1.6M Target=$41.35 Stop=$34
POSITION: GSB AF - Jan. $30c (72 delta, low OI) and/or Stock
http://www.investmenthouse.com/cs/gsb.html
SLE (Sara Lee--$22.8; +0.10; optionable): Nobody doesn't like Sara Lee (except in July)
http://biz.yahoo.com/p/s/sle.html
STATUS: Testing breakout. SLE exploded off the September low, rallying 6 points (33%) on better and better news. It peaked at 23.73 five sessions back and has moved back to test the 10 day MVA (22.48) on lower, average volume. Friday volume rose up just over average on the test of the 10 day and turn up. Testing the breakout is a very good place to enter positions as it gets some of the fluff out of a big gain. The rising volume Friday on the stat of a move back up is a good sign that buyers will use this pullback as a new buy point. Accumulation is positive at 6 accumulation weeks to 5 distribution weeks in the base.
Volume: 2.787M Avg Volume: 2.515M
BUY POINT: $23.11 Volume=3.8M Target=$27.55 Stop=$21.65
POSITION: SLE DD - April $20c (83 delta) and/or Stock
http://www.investmenthouse.com/cs/sle.html
CONTINUING PLAYS
Upside:
Play Date: 10/24/2002
ABFS (Arkansas Best--$30.87; +0.39; optionable): Trucking
http://biz.yahoo.com/p/a/abfs.html
STATUS: Testing the breakout. Still in the test of the breakout five sessions back, ABS held its ground Friday on very low, below average volume. This is an economy play, and as we see retailers look better, truckers are as well as they have to move the goods that retailers are selling. Accumulation in the base is positive at 6 up weeks on rising volume to 5 down weeks on rising volume. Money flow is outstanding.
Volume: 154.943K Avg Volume: 371.336K
BUY POINT: $31.05 Volume=475K Target=$37 Stop=$28.88
POSITION: FDQ CF - March $30c (60 delta, low OI) and/or Stock
http://www.investmenthouse.com/ci/abfs.html
Play Date: 10/03/2002
AGAM (Acres Gaming--$5.98; +0.09; no options): video poker
http://biz.yahoo.com/p/a/agam.html
STATUS: Cup w/handle. Bounced up off the 18 day MVA (5.80) Friday on some rising though still below average volume. This is a short base in a larger 17-month base, but we really like the action we are seeing. Looking for that breakout over the handle high at 6.20.
Volume: 12.2K Avg Volume: 58.986K
BUY POINT: New positions: 6.25 (orig. $5.71). Volume=100K Target=$7 Stop=$5.31
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/agam.html
Play Date: 10/14/2002
HLYW (Hollywood Entertainment--$19.96; +0.65; optionable): music and videos and popcorn
http://biz.yahoo.com/p/h/hlyw.html
STATUS: Cup w/handle. Still testing the strong move, bouncing up off the 10 day MVA (19.35) Friday on some rising though still below average volume. Held up very well last week and is ready for more upside.
Volume: 759.789K Avg Volume: 874.861K
BUY POINT: New positions: 20.81 (orig. $19.45). Volume=1.2M Target=$22 Stop=$18.09
POSITION: HQW AC - Jan. $15c (83 delta) and/or Stock
http://www.investmenthouse.com/cs/hlyw.html
Play Date: 10/03/2002
INGR (Intergraph--$19.45; +0.09; optionable): Technical software
http://biz.yahoo.com/p/i/ingr.html
STATUS: Testing the breakout. After making a solid move Wednesday, INGR came back to test the 10 day MVA (18.95) Friday. It showed good pop off that level if not any volume. Still right at a multiyear high, and with great accumulation it looks ready to give more in the next market move up.
Volume: 254.854K Avg Volume: 356.304K
BUY POINT: New positions: 19.80 (orig. $19). Volume=525K Target=$22.25 Stop=$18.25
POSITION: IGQ AC - Jan. $15c (74 delta, low OI) and/or Stock
http://www.investmenthouse.com/cs/ingr.html
Play Date: 09/25/2002
KDE (4Kids Entertainment--$28.8; +0.2; optionable): Kid stuff
http://biz.yahoo.com/p/k/kde.html
STATUS: Testing the breakout. KDE has surged and surged, and is now making another test toward the 10 day MVA (27.96) on lower, average volume. We like to pick leaders up off the 10 and 18 day MVA as they test back. This has been one of the early leaders and is still looking solid. This is the third test of the 10 day MVA since the breakout, and you usually get 4 to 5 such runs. This is an add-to current positions at this point.
Volume: 175.8K Avg Volume: 155.011K
BUY POINT: New buys: After at test of 28, 28.25 (orig. $21.31). Volume=180K Target=$31 Stop=$25.75
POSITION: KDE BW - Feb. $17.50c (74 delta) and/or Stock
http://www.investmenthouse.com/cs/kde.html
Play Date: 10/08/2002
NBIX (Neurocrine Biosciences--$41.72; +1.3; optionable): Biotechnology
http://biz.yahoo.com/p/n/nbix.html
STATUS: Cup/Ascending wedge. Looks as if it was a shakeout Thursday indeed as NBIX tapped at the 50 day MVA on the low (39.65) and then bounced up on stronger, average volume. It looks ready to make the move now. This is a wedge following a cup, one of our favorite patterns. Excellent accumulation.
Volume: 625.125K Avg Volume: 696.957K
BUY POINT: $42.35 Volume=1.1M Target=$50.75 Stop=$39.39
POSITION: UOT BH - Feb. $40c (60 delta) and/or Stock
http://www.investmenthouse.com/cs/nbix.html
Play Date: 10/12/2002
PFGC (Performance Food Group--$36.77; +0.52; optionable): Wholesale food
http://biz.yahoo.com/p/p/pfgc.html
STATUS: Cup w/handle. Forming a handle to its 6-month base, using the 18 day MVA at 36 as its support. Friday PFGC started up off that level on rising though still below average volume. Accumulation is positive at 6 accumulation weeks to 5 distribution weeks. Very nice handle as the market consolidated as well.
Volume: 401.2K Avg Volume: 423.747K
BUY POINT: New positions on breakout: 37.60 (orig. $36.55). Volume=500K Target=$39.5 Stop=$35.65
POSITION: PGU LF - Dec. $30c (82 delta, 73 OI)
http://www.investmenthouse.com/cs/pfgc.html
Play Date: 10/24/2002
QCOM (Qualcom--$36.52; +1.13; optionable): Communication equipment http://biz.yahoo.com/p/q/qcom.html
STATUS: Testing the breakout. Very nice consolidation last week, using the 10 day MVA (35.15) as support and moving up Friday though on lower, below average volume. QCOM is one of the few tech stocks that continues to show superior strength. We have been accumulating positions as it tested back last week, and now we are looking to finish off positions on a breakout over the recent high on strong volume.
Volume: 13.848M Avg Volume: 15.427M
BUY POINT: New positions: 37.15 (prior $35.65). Volume=18M Target=$40 Stop=$34.05
POSITION: AAW AZ - Jan. $32.50c (67 delta) or AAW AF - Jan. $30c (75 delta) and/or Stock
http://www.investmenthouse.com/cs/qcom.html
Play Date: 08/10/2002
VAR (Varian Medical Systems--$47.98; +2.23; optionable): Wholesale medical equipment
http://biz.yahoo.com/p/v/var.html
STATUS: Breakout. We were griping about VAR being unable to hold a gain, but it kept on consolidating on lower volume, testing the 18 day MVA (45.70) and then finding some buyers and shooting up Friday on strong volume. We saw the move taking place and issued another buy alert for the stock. A good case study in how you need to fight your emotions as long as a stock is 'behaving' well as VAR was. It was not racing up, but it was digesting some good gains being stingy with them at the same time. When it got rid of the short term profit takers, it shot out of the new handle to a 5-month base as demand outstripped supply. Still a buy at this point.
Volume: 960.4K Avg Volume: 465.735K
BUY POINT: New positions: 48.15 (orig. $42.75). Volume=600K Target=$54.55 Stop=$45
POSITION: VAR KH - May. $45c (67 delta) and/or Stock
http://www.investmenthouse.com/cs/var.html
Downside:
Play Date: 10/24/2002
VARI (Varian--$28.98; 0.00; optionable): Scientific and technical instruments
http://biz.yahoo.com/p/v/vari.html
STATUS: Put. A weak attempt to move up to the 18 day MVA Friday (29.56) on lower volume following Thursday's selling on very strong trade. Looking for VARI to start the move back down after this weak test of the breach. Again, it does not have to hit a new low make the play, just continue the momentum down to the recent low at 26.
Volume: 389.8K Avg Volume: 443.02K
BUY POINT: $28.85 Volume=500K Target=$26 Stop=$31.15
POSITION: IUA NF - Feb. $30p (-52 delta)
http://www.investmenthouse.com/ci/vari.html
NEW PRE-ANNOUNCEMENT PLAYS
Play Date: 10/26/2002
BBBY (Bed, Bath & Beyond--$37.29; +1.26; optionable): Home furnishings. Working on a date but wanted to take advantage of any good move from this pattern.
http://biz.yahoo.com/p/b/bbby.html
BACKGROUND: BBBY has announced 3 prior splits: 1996, 1998, 2000. The most recent was right in this range, and this is the first time BBBY had been back to this level since that split.
STATUS: Cup. Needs to form a handle, but with the retailers performing better and better, it may not get the time to make one. BBBY is on the verge of breaking out of a 4-month cup showing accumulation at 8 up weeks on rising volume to 6 down weeks on rising volume. That shows there are more buyers moving into the stock than sellers selling the stock during the base, and that means that investors are accumulating the shares. Again it really needs to form a handle here. We are putting the buy point over the Thursday high, a point that would act as the pivot point if a handle forms. If it does not clear that point on sufficient volume before a handle does form we will wait for a pullback before we enter positions.
Volume: 2.979M Avg Volume: 4.656M
BUY POINT: $37.65 Volume=7M Target=$43 Stop=$35.01
POSITION: BHQ BG - Feb. $35c (67 delta) and/or Stock
http://www.investmenthouse.com/cs/bbby.html
PRE-ANNOUNCEMENT PLAYS
Play Date: 10/05/2002
IGT (International Game Technology--$75.19; +2.34; optionable): Gaming electronics. New information: Forecast to announce a split 11-7-02 in conjunction with earnings.
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 did not give a test of 71.50, but started back up Friday from 72.50 on rising, above average volume. A great move as it showed excellent strength in holding above the 10 day MVA at 72.50 and moving on much stronger volume. A move over 75.70 is a breakout to a new high and a buy point if it is on solid volume. Accumulation in the pattern is positive at 9 up weeks on rising volume to 8 down weeks on rising volume.
Volume: 1.334M Avg Volume: 1.003M
BUY POINT: New positions: $75.75 (orig. $70.95). Volume=1.2M Target=$82 Stop=$69
POSITION: IGT DN - April $70c (51 delta) or IGT AM - Jan $65c (61 delta) and/or Stock
http://www.investmenthouse.com/cs/igt.html
Play Date: 10/02/2002
MME (Mid-Atlantic Medical--$40.85; -1.12; 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. For the first time since that time the stock is back at those levels.
STATUS: Testing breakout. Still under some pressure as it sold Friday on rising volume after it was unable to move over the recent highs (43.20) on that valuation downgrade and some questions about future earnings. It tapped at the 18 day MVA on the low (40.05) and recovered some of the loss, but it was still a substantial loss on volume. Again, it is not showing great strength and we want to see a breakout for new positions while not letting current positions get away from us.
Volume: 889K Avg Volume: 540.25K
BUY POINT: No new positions unless a breakout over the prior high (orig. $40.75). Volume=650K Target=$46 Stop=$39.55
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
Play Date: 10/17/2002
TTC (Toro--$61.7; +0.9; no options): Mowers and the like. Forecast to announce a split on 12-4-02 in conjunction with earnings. The company has not confirmed this information, but based upon our research this is the date for the release.
http://biz.yahoo.com/p/t/ttc.html
Based upon our research it does not appear that TTC has ever split its stock. The annual shareholder meeting was on 3-14-02
STATUS: Reverse head & shoulders. Solid move Friday as TTC bounced up off the 10 day MVA (60.10) on rising volume. Moving toward a breakout from the handle, and we want to see strong volume on that move. Accumulation is very good at 10 up weeks on rising volume to 6 down weeks on rising volume.
Volume: 67.9K Avg Volume: 76.098K
BUY POINT: Breakout: $62.08 Volume=120K Target=$72 Stop=$57.73
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cs/ttc.html
End Part 2 of 3
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