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stock trading, stock split
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11/07/02 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Thursday: None issued
Buy alerts issued: CREE; QCOM; QLGC
Trailing stops issued: None issued.
Stop alerts issued: ATRS
THE MARKET
It was a day of 2+% losses on the indexes across the board, but volume scaled back substantially from the previous upside sessions. That indicates this was some indecision selling after the Fed and the elections, not dumping of stocks. Many that we are in and that we are watching pulled back on lower volume, holding well above support. There were not a lot of breakdowns in stocks, and that is key. The internals and point losses made it look uglier than it was. QCOM after hours reported even better earnings than its upgraded expectations. That is always a positive and will help the market get through this period of gain consolidation.
Sentiment Indicators
Bulls versus bears investment advisors: Bulls shot up to 49.4, way too far too fast. Bears dropped to around 30. Quite a spread in a short period of time, and it is an indication that the rally could indeed struggle as the indexes bounce around the August peak.
VIX: 35.28; +0.8
VXN: 53.9; +3.84
Put/Call Ratio (CBOE): 0.88; +0.21. Good to see the put buying jump on a down session. It moved up a tenth Wednesday, and it really jumped today, indicating that option speculators were quick to jump onto the downside. That continued lack of faith in upside moves is key.
Nasdaq
Techs took a 3% hit Thursday, more than you want to see in any one session but at least on lower volume.
Stats: -42.28 points (-2.98%) to close at 1376.71
Volume: 1.763B (-19.27%). After a 27% jump in volume on Wednesday's gain, volume fell back substantially on the selling, slowing in the last few hours as the selling picked up its tempo. That is a better sign.
Up Volume: 283M (-1.427B)
Down Volume: 1.468B (+1.003B)
A/D and Hi/Lo: Decliners led 2 to 1. This is the first time decliners have really kicked up during a down session in the past two weeks and it is something we will keep an eye on.
Previous Session: Advancers led 1.74 to 1
New Highs: 37 (-10)
New Lows: 31 (+3)
The Chart: http://www.investmenthouse.com/cd/$compq.html
It was due for a breather, and it gapped lower and sold most of the session with very little effort at rallying. After reaching the August peak on Wednesday (1418-1426), the CSCO news left it vulnerable to speculation about what the Fed's action meant, the prospects with a republican Congress, whether Joe Kernen's hair is real. It looks as if it may fill the gap up on Monday by testing the 10 day MVA (1359.61), right at the gap up point at 1360. that would be a very nice test and gap fill if it continues on lower volume. It may even occur intraday and attempt a rally later Friday, but given that it is Friday, there will probably be less volume to jump in on to the upside if it does bounce.
S&P 500/NYSE
The techs sold more, but the large caps looked uglier, turning sharply and tanking with a thud to the 10 day MVA. At least volume fell significantly.
Stats: -21.11 points (-2.28%) to close at 902.65
NYSE Volume: 1.446B (-12.11%). Volume dropped off back to below average levels on the selling after solid, above average volume on two of the up sessions in the week.
Up Volume: 271M (-944M)
Down Volume: 1.184B (+763M)
A/D and Hi/Lo: Decliners led 1.9 to 1. As with the Nasdaq, the decliners moved higher in their first significant showing in two weeks.
Previous Session: Advancers led 2.03 to 1
New Highs: 16 (-11)
New Lows: 22 (0)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Turned back at the recent highs at 925, moving back down just below the July, August and September interim highs (909-911) and holding right above the 10 day MVA (900.50) on the close. We would prefer to see it step down gradually to test these levels, not a one-day dump. Volume was lighter and that was a positive, but it looks as if the large caps will test a bit lower (intraday would be best) before recovering. It cannot go much lower on the close or else it will be mired back in the recent consolidation range, and that is not constructive action. It needed to get up to the August interim high at 965 as the Nasdaq did before it sold to give it some cushion. That, however, was not the case, and that is why it needs a quick recovery, holding here at 900.
Dow:
Similar to the SP500, the Dow turned back at the interim highs and moved toward the 10 day MVA, but its volume was very low.
Stats: -184.77 points (-2.11%) to close at 8586.24
Volume: 1.446B (-12.11%)
It did not free itself from the July and August closing highs (8735 to 8745), and was dragged back below them. It managed to hold above the 10 day MVA without tapping it (8527.42) so it has some breathing room but not a lot. Needs to hold above 8500 on the close on this test or else it starts to have trouble with that prior overhead supply that will start to work on it if it cannot make a strong an faster break higher.
The Chart: http://www.investmenthouse.com/cd/$indu.html
FRIDAY
There are no big economic reports set for Friday, so the focus will turn to analyst comments and the few earnings left out there. DIS got all the press after hours, and though it is widely held, it would be hard to find an instrument sensitive enough to measure its impact on the overall market. More market moving so to speak is QCOM and its earnings. QCOM had raised guidance and then beat that by 4 cents. It also expects Q1 earnings to rise to 35 to 38 cents, well above the 29 cents expected. QCOM was up $1.65 after hours.
After the CSCO news, QCOM could give the techs a boost after a further test lower. Telecoms have been one of the leaders off of the bottom with QCOM, VZ, and NXTL being some of the marquis names performing well. The news may not be enough to prevent a further test lower by the market, but it also the kind that can prop it up and fuel a move back up; if those phones are selling, that means there are components to go into them. It also indicates that the technology recovery is starting and could spread out sector by sector. The AMD CEO still says the chip market has bottomed.
We have heard that all before of course, so the key will be the market action. Thursday was some hefty index selling, but many stocks held up just find, testing back on lower volume. We anticipate some more softness again early Friday, and that may lead to a late recovery. That can provide some more opportunity to add to positions on the weakness as long as the action remains under control, i.e., without a lot of breakdowns. Again, we are seeing many pullbacks toward support on this selling after good moves higher, and if those hold, they will be good entry points for the move back up.
Support and Resistance
Nasdaq: Closed at 1376.71
Resistance: 1418, the interim test after the September 2001 low, and 1426 the August high. Then some price resistance at 1500 and the 200 day MVA (1528.82).
Support: 1357.09, the October 1998 bear market low. The 10 day MVA (1359.61). July, August, and September interim highs at 1345. The 18 day MVA (1328.11). The 50 day MVA (1297.66). 1200 (August closing low) to the July intraday low at 1192.42. 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 902.65
Resistance: July, August and September interim highs at 909 to 911. Some resistance at 921. Price resistance at 950. 965, the September 2001 closing low along with the August 2002 high. Then price resistance at 990.
Support: The 10 day MVA (900.50). The September 2000/May 2001 downtrend line at 888. The 18 day MVA (889.39). The March down trendline at 883. The 50 day MVA (881.87). 875 is some price support. 850 to 855 (the October 1997 and Q2 1998 lows). The first March down trendline 801. Prior closing lows and highs at 800 from July and October. The July intraday low at 775.68. 750 to 760 with an intraday touch to 730.
Dow: Closed at 8586.24
Resistance: The late July and early September interim high at 8726 to 8762.14 (8745 closing). A range of resistance from 9000 on up to 9050. The 200 day MVA (9271.50). 9500 from June and July lows.
Support: 8500, former price points. The 10 day MVA (8527.42). The 18 day MVA (8407.65). The exponential 50 day MVA (8322.01) and then 8250 and are key. The simple 50 day MVA (8175.63). The second March down trendline at 7975. 8000 (August low at 8043; September 2001 intraday low at 8062).
Economic Calendar
11-4-02
Factory Orders, September (10:00): -2.3% actual, -3.0% expected, -0.4% prior (revised from 0.0%).
11-5-02
ISM Services, October (10:00): 53.1 actual, 52.0 expected, 53.9 prior.
11-6-02
FOMC meeting results, 2:15ET: 50 basis point cut to 1.25% and a change in bias to neutral.
11-7-02
Productivity, preliminary, Q3 (8:30): 4.0% actual, 4.2% expected, 1.7% prior (revised from 1.5%).
Initial jobless claims (8:30): 390K actual, 400K expected, 410K prior.
Wholesale inventories, September (10:00): 0.5% actual, 0.2% expected, 0.1% prior (revised from 0.2%).
FOMC minutes (2:00)
Consumer credit, September (3:00): $10B actual, $6.0B expected, $5.6B prior (revised from $4.2B).
TEAM TRADES
CREE: We were not very active today, but we were watching. As the close approached we issued an alert naming several stocks we were looking at. One was CREE. CREE has made a strong move and was up Wednesday on strong volume again. Thursday it was backing off, testing down close to the 10 day MVA on the low and then starting up. It dipped again in the last hour, but the in the last 20 minutes started up. We were interested in adding positions and looked at some March $15 calls. They were trading 5.70 by 6, and we put in a limit order at 5.90 just to see if it could be split. The stock was rising so we were not too sure; if we got hit great, if not we would get another chance. When adding to positions we try to get our price as opposed to chasing it. As it turned out the fill was almost immediate at 5.90. CREE moved up some more and closed a a few cents higher with the options holding steady.
THE PLAYS:
Good moves:
Upside:
BIO (Bio-rad Labs--$45.9; +2.65; optionable): Scientific & technical instruments
http://biz.yahoo.com/p/b/bio.html
STATUS: Double bottom. This sector is really heating up, and BIO made a counter-market move Thursday on continued solid, above average volume after a test of the 10 day MVA (43.25). The move bounced it up to resistance at 46, the middle of the double bottom pattern. Now it could form a handle to the pattern here, i.e., a lateral consolidation above 44, but with the great volume we see we will look to enter on a breakout over the September high that marks the middle of the pattern. Accumulation is solid at 5 up weeks on rising volume to 3 down weeks on rising volume. Relative strength has already broken out, and money flow is leading this move higher.
Volume: 174.1K Avg Volume: 141.409K
BUY POINT: $46.09 Volume=225K Target=$53 Stop=$42.86
POSITION: BIO CI - Mar. $45c (63 delta) and/or Stock
http://www.investmenthouse.com/ci/bio.html
PNRA (Panera Bread--$33.9; +0.07; optionable): Good bread and related bakery goods
http://biz.yahoo.com/p/p/pnra.html
STATUS: Double bottom. PNRA split in late June and immediately started to form this base. It bounced to a high at 35 and then formed the right leg. After rallying back it is now moving more or less laterally this week on below average volume, riding above the 10 day MVA (33.05, tapped on the Thursday low). Accumulation since the split is solid at 5 up weeks on rising volume to 3 down weeks on rising volume, and relative strength is already breaking out ahead of the stock as it moves laterally. It has been banging its head at 34.25 the past several sessions as it forms this handle. It looks ready to make a breakout, and we will move in over that level.
Volume: 620.845K Avg Volume: 906.5K
BUY POINT: $34.38 Volume=1.2M Target=$39.75 Stop=$31.97
POSITION: UPA BF - Feb. $30c (73 delta) or UPA EF - May $30c (71 delta) and/or Stock
http://www.investmenthouse.com/ci/pnra.html
Revisited:
Play Date: 10/29/2002
LXK (Lexmark Intl.--$62.03; -1.1; optionable): Computer printers
http://biz.yahoo.com/p/l/lxk.html
STATUS: Testing the breakout. LXK blasted off on the breakout Monday on strong volume, gapping higher. It has now moved back to test the gap, moving lower the past two sessions on much lower volume. It has been holding pretty steady on the lows, holding up above 61.50 and being stingy with its gains. It may test down toward 61 one more time, but we are looking for a move higher on another surge in volume that will most likely accompany a turn back up in the market.
Volume: 1.478M Avg Volume: 1.562M
BUY POINT: New positions: Another test of 61.50, 62.25 (orig. $61). Volume=2.2M Target=$72 Stop=$56.73
POSITION: LXK DK - April $55c (63 delta) and/or Stock
http://www.investmenthouse.com/ci/lxk.html
End Part 1 of 2
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stock trading
stock split
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