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top stock pick, stock strategy
Begin Part 2 of 2
THE PLAYS:
Please note that when we reference the 10, 18, and 50 day moving averages (MVA), those are exponential moving averages (EMA). The 200 day moving average is always simple (SMA). We will note when we reference a particular MVA differently, e.g., a simple 50 day MVA.
Best Plays: Some plays we have looked at recently continue to hold good patterns, such at OLOG and UCU, and we are revisiting KLAC and NVLS tonight after today's rally. We have found additional new patterns as well. Put plays are continued at the bottom of the repor; please see our note about them in that section.
Best Plays:
1) SCFS: Ready to break higher.
2) RDEN: A roller getting ready to move back up from support.
3) NVLS: Broke a down trendline on today's move.
4) ACS: A tight doji at support.
5) LLL: Ditto.
6) Puts: JPM,
New Stocks:
SCFS (Seacoast Fin Svcs--$14.75; +0.06; no options): Savings & Loan
STATUS: In a pennant pattern as the stock tests its recent breakout from a saucer base. The stock pulled back to test the 10 day MVA on the last two intraday lows (at 14.56), and volume shot higher Tuesday, to 173,200 (avg. 105,000). The stock moved up slightly on the high volume from a Monday star doji. We are looking for a move over upper resistance in the pattern, 15.06, for taking possible positions with stock. SCFS has strong money flow and high relative strength. Initial profit target: $17-$18.
BUY POINT: 15.19, on volume of 142,000 or better. Stop loss: 14.69-14.94.
POSITION: Stock.
http://www.investmenthouse.com/cd/scfs.html
(Click to view the chart)
http://biz.yahoo.com/p/s/scfs.html
A Rolling Stock:
RDEN (Elizabeth Arden Inc--$14.75; -0.31; no options): Consumer Non-Durables: Personal Products
STATUS: The stock rolled up from its 50 day MVA (currently at 14.06) in February, the last two times it made its way back down to the support level. The stock is there again, having dropped down from the March closing high of 16.19 over the last week on steadily declining volume (appropriate for pullbacks). Volume was down to 27,600 (avg. 87,545) as the stock gapped lower on the opening price of 14.38 and moved up from there. We are looking for a roll back up to the 16 range or better (target), for possible positions with stock. RDEN may pull back further to complete the move to support (to 14.06). Strong money flow and buying. RDEN has trended up since August, from 7.
BUY POINT: On a move up from here on volume of 37,000 or better.
POSITION: Stock.
http://www.investmenthouse.com/cd/rden.html
(Click to view the chart)
http://biz.yahoo.com/p/r/rden.html
A new double-bottom pattern:
ABK (Ambac Financial Group--$59.24; -0.74; optionable (ABK)): Insurance
STATUS: A stock in a decent sector in this market, ABK is at support after pulling back in a handle to a small double-bottom pattern. The stock closed on the 10 day MVA while testing the 18 day MVA on the low of 58.55. Volume remains low and below average at 670,500 (avg. 751,000). We will look at positions with stock and/or calls to buy on a breakout over the handle high of 61.85. The stock shows strong money flow and good buying. Initial profit target: $71-$74.
BUY POINT: 61.98, on volume of 1 million or better. Stop loss: 61.48--61.73.
POSITION: Stock and/or May $60 calls to buy (ABK EL).
http://www.investmenthouse.com/cd/abk.html
(Click to view the chart)
http://biz.yahoo.com/p/a/abk.html
NVLS (Novellus Systems Inc--$45.38; +2.44; optionable (NLG)): Semiconductor
STATUS: Reported on this stock March 6 as it completed the last leg of a double-bottom pattern. Since then, NVLS pulled back to test the 50 day MVA (41.81 currently) and moved up for two days on a rebound from that level as the stock now forms a pattern more like an ascending wedge. Volume dropped back Tuesday but remained high at 11.4 million (avg. 6 million), holding the stock just under the 200 day MVA (45.70), though NVLS did move across the down trendline (that connects September, January and February highs). We will look at taking positions on a breakout over the pattern high of 49.50. Initial profit target: $57-$59.
BUY POINT: Breakout: 49.63, on volume of 9 million or better. Stop loss: 49.130049.38.
POSITION: Stock and/or June $40 or $45 calls to buy (NLG FH or FI).
http://www.investmenthouse.com/cd/nvls.html
(Click to view the chart)
http://biz.yahoo.com/p/n/nvls.html
KLAC (Kla-Tenor Corp--$43.81; +2.56; optionable (KCQ)): Semiconductor
STATUS: We reported on the stock March 6 after it had completed the right leg of its double-bottom pattern. Since then, the stock pulled back in a handle to test the 50 day MVA (40.44), then moved up Tuesday on lower, but still above average volume (8.4 million; avg. 7 million). Price closed just under the 200 day MVA (44.16). In a continued rally, we will look for a break of the resistance and move over the handle high of 46.25. Initial profit target on the breakout: $53-$56.
BUY POINT: Breakout: 46.38, on volume of 10 million or better. Stop loss: 45.88 46.13.
POSITION: Stock and/or June $40 calls to buy (KCQ FH).
http://www.investmenthouse.com/cd/klac.html
(Click to view the chart)
http://biz.yahoo.com/p/k/klac.html
THE PORTFOLIOS: Each report, we look at these to see which is in a buy position. We don't cover them all each time, just the ones that are looking as if they are ready to pick up a few shares.
THE LEADERS: We are not changing our strategy on the current stocks in the leaders portfolio. Stocks such as JNPR, AMCC, CIEN, GLW, SEBL, VRSN and EXTR continue to exhibit superior earnings power and will rebound, but it is further out in the future. Indeed we still have investments in several of these. What we are doing is looking to those leaders in the current market, those stocks that are asserting good patterns on top of strength in earnings while the other stocks we have been following work through their bases. This provides additional stocks that are showing more near-term potential in the current market. We focus on the stocks that are performing best in a down market as they tend to help lead when the market turns back up.
New Leaders: ACS, CPN, SGR, ESRX, NATI, LLL
Previous Leaders: ADBE, AMCC, ARBA, BEAS, BRCD, CIEN, EMC, EXTR, GLW, JNPR, NEWP, NTAP, PMCS, SCMR, SEBL, VRSN, VRTS,
ACS (Affiliated Computer Svc--$65.01; -0.18; optionable (ACS)): Computer Software & Services: Information Technology
STATUS: Continued to pull back, showing a tight doji on the 10 day MVA, and testing the 18 day MVA on the low of 64.35. Looks ready for a move up from here (volume was stronger and above average at 734,400; avg. 427,000). We will look for a move up from the support and doji, looking at taking positions on a move back over the February high of 68.59. Relative strength is still well ahead of price, a bullish indicator.
BUY POINT: Over 68.59, on volume in the range of 670,000 or better.
POSITION: Stock and/or July $65 calls to buy (ACS GM).
http://www.investmenthouse.com/cd/acs.html
(Click to view the chart)
LLL (L-3 Communications--$86.73; -0.12; optionable (LLL)): Telecom
STATUS: Showing a tight doji at support (10 day MVA), after testing the 18 day MVA on the low of 85.36. Volume remained below average and just up at 361,200 (avg. 380,000). After a 4-day pullback (not as orderly as we like, but volume looked pretty good throughout) on overall lower, below average volume, the stock looks ready to attempt a move back up. We are waiting for a move over the high of 90.51, hit last week, for taking positions with stock or calls to buy. The stock received a buy rating from Merrill Lynch today.
BUY POINT: On a move back over 90.51, on a bounce from here or the 18 day MVA (44 range).
POSITION: Stock and/or July $85 calls to buy (LLL GR).
http://www.investmenthouse.com/cd/lll.html
(Click to view the chart)
CPN (Calpine Corp--$45.92; -1.12; optionable (CPN)): Electric Utilities
STATUS: Hit the 18 day MVA as expected, moving up from a low of 44.70 on stronger volume (3.4 million; avg. 3.5 million). We are watching for a bounce back up from here on continued rising, above average volume. CPN hit a high of 50 Thursday.
BUY POINT: Back over 50 on a move up from the 46-47 range, on strong volume. Stop loss: 45.
POSITION: Stock and/or July $45 calls to buy (CPN GI).
http://www.investmenthouse.com/cd/cpn.html
(Click to view the chart)
UP & COMERS PORTFOLIOS:
EXDS, TQNT, BVSN, SANM, PKI and GMST for now.
No reports on stocks in this portfolio for the weekend report. We are in the process of revamping this portfolio.
MEMBER PORTFOLIO: BRCM, CHKP, CSCO, EMLX, IDTI, INTC, JDSU, MVSN, NT, PWER, SUNW, VTSS
PUT PLAYS: If put positions were not closed today, consider doing so tomorrow if the market continues to head higher, unless the stocks hit resistance and turn back down from there. As always, keep reasonable loss cutting rules in place. Several of the put plays tonight are in anticipation of a continued move up toward resistance; that is, they may head higher until they hit resistance, which can then take them back down after a day or two if the rally fades. Make sure you see the move and then enter.
New Puts:
JNJ (Johnson & Johnson--$94.15; -0.80; optionable (JNJ)): Drug Manufacturers
STATUS: Opened above but then broke support of the 200 day MVA (94.78), dropping to a low of 92.49 before battling back up on stronger volume (4.9 million; avg. 3.3 million). If the stock cannot break the resistance of the moving average, we will look for a turn back down after a test of that level (95 range). We will look at buying puts on a move down, with a target of 90. Possible support in the 92-93 range, so look for strong volume on the move down.
BUY POINT: On a move down after a test of the 94.78 range, on continued strong volume.
POSITION: April $105 puts to buy (JNJ PA).
http://www.investmenthouse.com/cd/jnj.html
(Click to view the chart)
JNPR (Juniper Networks--$58.63; +8.94; optionable ( JUX): Computer Hardware: Networking & Communication Devices
STATUS: Moved up to the 10 day MVA on stronger volume (28.5 million; avg. 20.3 million), the level having proven resistant to any move over it since late January (even on strong up volume). Thus, if the market runs into resistance again tomorrow, we will look at playing JNPR down to the 50 level (low of 49.88; Monday low was 48.75). If in a continued rally it breaks over the 10 day MVA, we will look at the 18 day MVA (66.98) as resistance; on a bounce down from that level we will look at playing the stock down in a market sell-off, on strong volume.
BUY POINT: On a move back down from the 10 day MVA (60.17) on continued strong volume, for a move down to the 50 range. From the 66.98 range on a continued move up to that potential resistance.
POSITION: April $80 puts to buy (JUX PP).
http://www.investmenthouse.com/cd/jnpr.html
(Click to view the chart)
SEBL (Siebel Systems Inc--$29.84; +4.53; optionable (SGW)): Computer Software & Services: Application Software
STATUS: Moved up from a doji that was at the stock's new low (25.31), the move accompanied by stronger volume (24 million; avg. 14.3 million). Look for a continued move up to the 10 day MVA (33.20), but upon meeting that resistance, we are anticipating a turn back down unless the rally continues with some strength. If it breaks through there, the 18 day MVA is at 39.71, the next resistance level.
BUY POINT: On a move down from the 10 day MVA (33) on continued strong volume, for a target of 26, or, from the 18 day MVA (39 range) on continued strong volume, for the same target.
POSITION: April $45 puts to buy (SGW PI).
http://www.investmenthouse.com/cd/sebl.html
(Click to view the chart)
New Puts (from last night):
LH (Laboratory Cp Am Hldgs--$137.00; +0.50; optionable (LH)): Health Services
STATUS: Showed a tight doji on lower volume (383,700; avg. 390,000). This is the point from where we may get the weak bounce referred to in last night's report; the stock can meet resistance at the level of the high (140.75) for a turn back down. On that move, we will look for stronger volume for taking positions with puts on a move below 137. Target: 130 (January and February lows).
BUY POINT: On a move below 137 on strong volume, after a possible move up to the 140 range.
PLAY: On the drop, April $150 (LH PJ) puts to buy.
http://www.investmenthouse.com/cd/lh.html
(Click to view the chart)
JPM (JP Morgan Chase & Co--$47.40; +1.91; optionable (JPM)): Financial
STATUS: Moved up from a test of Monday's closing price (on the low of 45.60), the high tapping resistance at the 200 and 10 day MVAs (51.28 and 47.93, respectively). Volume was lower, what we look for on such moves up to resistance as it is a set-up for a fall back down. On a move back down on selling in the brokerages and financials we will look to enter positions. Initial target of 40.
BUY POINT: On a move below 44 on above average volume, April $55 puts to buy (JPM RK).
http://www.investmenthouse.com/cd/jpm.html
(Click to view the chart)
LNCR (Lincare Holdings Inc--$52.81; -0.32; optionable (LQN)): Health Services
STATUS: Still hugging resistance, the 50 day MVA (53.38), after running to a high of 55 that tested higher resistance (18 day MVA). Volume dropped lower to 358,500 (avg. 759,000). That is exactly the kind of weaker move back up to resistance. If LNCR cannot make the move back over resistance, we are looking at entering on the failure of that move instead of the move below 50 as the failure to take out resistance often leads to a farther fall. Target: 44-46.
BUY POINT: On a turn back down from the 50 day MVA (53.38) for a move below 50, April $60 puts to buy (LQN PL).
http://www.investmenthouse.com/cd/lncr.html
(Click to view the chart)
DJX ($102.91; +0.83; optionable (DJV)): Options on the Diamonds (tracking index for the DJ-30)
STATUS: At the crossroads with the Dow. It used Monday's closing price at 102.08 as support for a slight bounce back on stronger volume. The index dropped to 101.08 on the low and tested the 103 level just as expected on the high of 102.93. Stronger support is in the 100 range, and on a move down from here if the index cannot break above 103, that will be our target.
BUY POINT: On a move down from 103 on rising volume, April $110 puts to buy (DJV PF).
Continued Puts:
FITB (Fifth Third Bancorp--$53.88; +1.94; optionable (FTQ)): Regional Banks
STATUS: After making the drop as expected (the stock couldn't hold for a break of resistance at its 50 day MVA, 55.80), FITB moved back up from a low of 51.38 to the stiff-looking lower resistance level at 54. The move was on lighter, below average volume of 1.8 million (avg. 1.8 million), so we will look for a turn back down. Want to see stronger volume to take the stock down to our target in the range of 50.60, the 200 day MVA.
BUY POINT: On a move back down from here or after another test of 54 (tapped on the intraday high) on stronger volume.
POSITION: April $60 puts to buy (FTQ PL).
http://www.investmenthouse.com/cd/fitb.html
(Click to view the chart)
QQQ (Nasdaq 100--$44.45; +2.15; optionable (QQQ)):
STATUS: Moved up on still strong but lower volume (79.6 million; avg. 60 million). We are looking for a move back up to the 10 day MVA at 47.62, then on a downturn in the market we look for the index to head back down to the 42 range. We will look at buying puts on that move.
BUY POINT: After a move up to resistance at the 47 level (10 day MVA), on a move back down with a target of 42.
POSITION: April $52 puts to buy (QQQ PZ).
http://www.investmenthouse.com/cd/qqq.html
(Click to view the chart)
VRTS (Veritas Software--$59.13; +5.19; optionable (VUQ)): Computer Software & Services: Application Software
STATUS: Moved up from Monday's doji (the stock hit a low of 52.13 that day) on still high volume (17.1 million; avg. 12.9 million), but still in a major downtrend. The stock can continue on with the current momentum to the 10 day MVA (62.28) or even the 18 day MVA (66.35) in a continued rally, but either level can turn the stock back down, just as it has over the last month and a half. Indeed, the high tapped 60.25, possible resistance right here on the lower volume. On a move down from 60 or from either moving average, we will look at continued positions with puts. Target for the move down from resistance: $52-$54.
BUY POINT: On a move down from 60, 62, or 66 on rising volume.
POSITION: April $75 or $80 puts to buy (VUQ PY or PZ).
http://www.investmenthouse.com/cd/vrts.html
(Click to view the chart)
Good Investing!
Jon Johnson and The Daily Staff
All of the foregoing is commentary for informational purposes only. All statements and expressions are the opinion of Online Investment Services, LP or its paid consultants and are not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on our related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolio of Partners of Online Investment Services, LP or its paid consultants may, in some instances, include securities mentioned herein and on our web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors.
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