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us stock market, trading strategy
Begin Part 2 of 2
TEAM TRADES
VRTS: A stock that we felt could either move well in a Nasdaq rally and lead up, or stall at the 18 day MVA. We have been traveling around the country this week, so we were telling our brokers what we were looking at with certain stocks, breaking them down into upside and downside plays. Talking with one of our brokers before the open we saw VRTS set to open at the point we had marked on our scorecard, the 18 day MVA. We said we wanted to get in on the downside if it could not break over the 18 day MVA and started to move down. We said we wanted to buy the April 85 puts to get the delta we wanted for the move down. VRTS was one of several we gave to the broker, and then went about some other business as we could not watch things ourselves. About a half hour later we received a call from the broker that VRTS and several other put candidates had hit resistance, tested it, and were starting down along with the Nasdaq and the QQQ. The options were trading roughly 25.50 by 26.25. We told the broker to slice off one-eighth to one-quarter and go for it. We also talked about what to do with some other positions (some triple Q puts from Wednesday) and some other puts and breakouts. While we were doing this the VRTS was taken care of. We went over the sell point again with the target at 52 to 54 on the stock. As turned out, the stock tested 53 and change on the low and bounced at the close. Our broker had put in an order to sell, but it was not hit for some reason; he is checking into that tonight, but we may get another chance early tomorrow to sell as well if there is some early softness.
For a review of frequently asked questions, please use the link below:
http://www.investmenthouse.com/1questions.htm
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: We have a couple of new plays (HOFF and HSIC) that look good on the report tonight, and CPN and SGR, in the New Leader portfolio, made decent moves today. Several previously covered stocks look promising (double-bottoms, rolling pattern, cup with handle) and are included. Put plays are continued at the bottom of the report; please see our note about them in that section.
Best Plays:
1) HOFF: Testing the breakout.
2) HSIC: In the handle of a double bottom pattern.
3) HCC: Looks ready to move up in the handle.
4) RDEN: The roller is moving.
5) SGR: Trying another move up on good volume.
6) Puts: DJX, OEX, JPM.
New Stocks:
Testing the Breakout:
HOFF (Horizon Offshort Inc--$23.94; +0.81; no options): Materials & Construction
http://biz.yahoo.com/p/h/hoff.html
STATUS: Broke out of a saucer base and has tested back to the 10 day MVA (23.27), support which is above the breakout point of 21.01. The stock moved up from the moving average, where it opened at 23.38, on stronger volume of 195,900 (avg. 179,000), and looks ready to tack on more. HOFF broke out to a new all-time closing high of 25; the March high is 25.75. On a move over that high, we will look at positions with stock.
Initial profit target: $29-$31.
BUY POINT: Over 26 on volume in the range of 264,000 or better. Stop loss: 25.25-25.50.
POSITION: Stock.
http://www.investmenthouse.com/cd/hoff.html
(Click to view the chart)
A new double-bottom:
HSIC (Henry Schein Inc--$33.38; -0.12; optionable (HQE)): Medical Equipment Wholesale
http://biz.yahoo.com/p/h/hsic.html
STATUS: Pulling back in the handle of a double-bottom pattern of almost three months duration. Volume has been high in the handle, not what we like to see, but it did drop back to 296,800 Thursday (avg. 421,727) as the stock showed a tight doji. Price dropped to a test of the 10 and 18 day MVAs at 32.67 and 32.22 (respectively) and closed nearer the high of 34.06, but the volatile volume means we might see a pullback to at either of those lower moving averages. Regardless, we will watch for a breakout over the handle high of 34.63. Outstanding money flow and buying. Initial profit target: $39-$41.
BUY POINT: 34.76, on volume of 633,000 or better. Stop loss: 34.26-34.51.
POSITION: Stock and/or July $30 calls to buy (HQE GF).
http://www.investmenthouse.com/cd/hsic.html
(Click to view the chart)
Updated double-bottom patterns:
PL (Protective Life Corp--$30.49; +0.57; optionable (PL)): Life Insurance
http://biz.yahoo.com/p/p/pl.html
STATUS: The stock pulled back in the handle to the double-bottom and tested the 50 day MVA (29.63), bouncing back Thursday on slightly stronger volume (139,500; avg. 252,909). The pullback was more extended than we wanted, but the stock looks ready to head higher if it can get good volume behind it. Handle high is 32.25. PL shows good buying and strong money flow. Relative strength has moved out ahead of price, a strong indicator for a move up. Initial profit target: $37-$39.
BUY POINT: 32.38, on volume of 379,000 or better. Stop loss: 31.88-32.13.
POSITION: Stock and/or July $30 calls to buy (PL GF).
http://www.investmenthouse.com/cd/pl.html
(Click to view the chart)
HCC (Hcc Insurance Holdings--$24.60; -0.11; no options): Insurance
http://biz.yahoo.com/p/h/hcc.html
STATUS: Still in a handle pullback, and now at the 18 day MVA, tested the last two days on the intraday lows. The stock tried to move up and over the 10 day MVA (24.77) on the high, but volume was low and below average at 220,300 (avg. 276,000), resulting in the slight drop back to the 18 day MVA. We will look for an attempt at a breakout on a move up from this support level. HCC shows great buying and strong money flow, and relative strength is out and ahead of price, a bullish sign. Initial profit target: $30-$31.
BUY POINT: 26.13, on volume of 414,000 or better. Stop loss: 25.63-25.88.
POSITION: Stock.
http://www.investmenthouse.com/cd/hcc.html
(Click to view the chart)
Other Updated Stocks:
A rolling pattern:
RDEN (Elizabeth Arden--$15.31; +0.56; no options): Consumer Durables: Personal Prod
http://biz.yahoo.com/p/r/rden.html
STATUS: We were looking for a run up to the 16 range, and RDEN has been on the move the last two days since the initial report on the stock. Thursday's move was on a pop up in volume, to average levels (97,300). Look for a continued move up, watching 16 on approach of that possible resistance (January top and hit twice near the March high of 16.44). If we get lucky the stock will move ahead of the March high, but we will evaluate price/volume action at that point before a possible add-to with positions for stock. Outstanding money flow and buying, and relative strength has moved out ahead of price (bullish). Initial profit target: $16.
BUY POINT: On further upward movement on continue rising volume, for a move up to 16 for now.
POSITION: Stock.
http://www.investmenthouse.com/cd/rden.html
(Click to view the chart)
WLSN (Wilsons The Leather Expt--$19.75; +1.06; no options): Retail: Apparel
http://biz.yahoo.com/p/w/wlsn.html
STATUS: Made the move we were looking for in the cup with handle, but the volume just wasn't behind it, dropping back to 59,300 (avg. 84,318). We will see if volume can catch up with price in support of this breakout attempt. Handle high is 20. High money flow and relative strength. Initial profit target on the breakout: $23-$24.
BUY POINT: 20.13, on volume of 125,000 or better. Stop loss: 19.63-19.88.
POSITION: Stock only.
http://www.investmenthouse.com/cd/wlsn.html
(Click to view the chart)
RESP (Respironics Inc--$26.81; +1.00; optionable (SBU)): Health Service
http://biz.yahoo.com/p/r/resp.html
STATUS: Same story as with WLSN: the stock made the move we wanted, but volume dropped lower, not good price/volume action (110,000 (avg. 226,000). We will watch for stronger volume to keep this one moving; the stock needs to break resistance at 27. RESP is in a 10-week base (previous high 34), riding the bottom at this time, and after consolidating in a tight, 4-day lateral movement last week, is trying to make a move up. We will look at taking positions on a move over the January high of 29.13. Money flow is strong. Initial profit target: $33-$35.
BUY POINT: Aggressive: On a move over 27 on above average volume. Safer: Over 29.13 on volume of 245,000 or better.
POSITION: Stock and/or July $25 calls to buy (SBU GE; 56 open interests).
http://www.investmenthouse.com/cd/resp.html
(Click to view the chart)
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. 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,
CPN (Calpine Corp--$48.52; +3.82; optionable (CPN)): Electric Utilities
STATUS: The stock shot up on positive comments by Lehman, and an upgraded target of $80 by Goldman Sachs. Volume was up but still just under average at 3.5 million (avg. 3.5 million) as the stock gapped way up on the opening price of 47.40 then tested support on the low of 46.54 (10 day MVA) before heading up to close positive. The March high is 50, and on a breakout over that price, we will look at taking positions with stock and/or calls to buy. The stock is trying to break out of its 6-month base and is seeing volatile action since mid-February, continually dropping back to test the 18 day and 50 day MVAs. Price dropped almost to the latter moving average Wednesday, holding near that level on the closing price before today's pop back up. Initial profit target: $57-$60.
BUY POINT: Over 50 on volume of 4.6 million or better. Stop loss: 49.50-49.75.
POSITION: Stock and/or July $45 calls to buy (CPN GI).
http://www.investmenthouse.com/cd/cpn.html
(Click to view the chart)
SGR (The Shaw Group Inc--$51.80; +1.73; optionable (SGR)): Manufacturing: Industrial Equipment & Components
STATUS: Continued a Wednesday rebound from the 50 day MVA (48.03) as volume shot well above average (1.1 million; avg. 410,363) and the stock broke back over the 10 and 18 day MVAs. SGR closed above the 10 day MVA (51.39), with the high testing potential resistance at 52.60. The February closing high is 54.91 for a break to a new high, but the aggressive can play the move from here on the momentum. After testing the 50 day MVA (as it did in January and February before running to the new closing high), SGR looks ready to forge another leg up.
BUY POINT: Aggressive: Up from here on continued strong volume. New high: Over 55 on continued strong volume.
POSITION: Aggressive: Stock and/or July $45 (51 open interest) or $50 calls to buy (SGR GI or GJ).
http://www.investmenthouse.com/cd/sgr.html
(Click to view the chart)
LLL (L-3 Communications--$82.16; -1.64; optionable (LLL)): Telecom Equipment
STATUS: Heading for the 50 day MVA (80.91) after being hit with selling Wednesday, the continued move down on still strong but declined volume of 552,400 (avg. 387,045). The 50 day MVA can support the stock and prevent a further breakdown; the stock also hit 80.20 three times since January, added support. In a market bounce, LLL may bounce, but after the selling that will most likely be weaker than what could take price back over the 10 and 18 day MVAs (85.40 and 84.98, respectively). We prefer to wait for a move at least back over higher resistance at 88.30 (February high).
http://www.investmenthouse.com/cd/lll.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 tonight. Please bear with us as 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: We continue to look at put plays in the context of two possible scenarios: a breakdown on the ORCL and CPQ news, or in a market bounce as support holds on the Nasdaq. In a breakdown, we will play the puts from here or on a retest of resistance levels. On a bounce, if the stocks break resistance on strong volume, they can head up to the next resistance level for possible upside plays. Once there, they may set up for moves back down later. As always, keep reasonable loss cutting rules in place, be ready to close positions quickly if necessary, and make make sure you see the downside move, along with the market going down as well, and then enter.
Back to the DJX:
DJX ($100.31; +0.58; optionable (DJV)):
STATUS: Got the relief bounce but the index pulled off the high of 100.97. Volume was lower, but on a break below 100, we are going to look at puts as the Dow threatens to roll over.
BUY POINT: Below 100 on strong volume. The index may move up to test 100 after breaking the support; on a move back down from that test is the entry point (the "kiss good-bye").
POSITION: April $110 puts to buy (DJV PF).
New Puts (from Wednesday):
ESRX (Express Scripts Inc--$78.19; +3.56; optionable (XTQ)): Health Services
STATUS: Volume was lower (though still well above average at 1.1 million) but the stock had the momentum to carry it back over the 200 day MVA (75.69). In a market bounce the stock can run up to the 10 day MVA (80.78, tested on the high of 79.69), but we will look for resistance; if volume is weak, the stock can turn back down for a play to 76 (target).
BUY POINT: On a move back down from 80-81 after the stock moves up to test that potential resistance, April $90 puts to buy (XTQ PR).
http://www.investmenthouse.com/cd/esrx.html
(Click to view the chart)
Continued Puts:
JPM (JP Morgan Chase & Co--$45.26; +1.51; optionable (JPM)): Financial
STATUS: Moved up from Wednesday's new March low of 43.39, but volume was weak and below average after the selling, at 8.5 million (avg. 10 million). Looking for continued weakness and a move down, perhaps to October-December consolidation levels around 37.50, but we are first looking at 40 as our initial profit target. This bounce does not appear to have strength or staying power, and the stock will likely turn down from resistance in the 45.30 range.
BUY POINT: On a turn back down (from a retest of 45-46 resistance) on strong, above average volume.
POSITION: April $55 or $50 puts to buy (JPM PJ or PK).
http://www.investmenthouse.com/cd/jpm.html
(Click to view the chart)
JNPR (Juniper Networks--$55.50; -1.75; optionable ( JUX): Computer Hardware: Networking & Communication Devices
STATUS: Opened higher but couldn't make the move up to the 18 day MVA (64.85) on the lower volume (26.3 million; avg. 20 million), instead moving down slightly after gapping over the 10 day MVA on the opening price of 61.31. We are looking for a move back down to the March low of 48.75, but will need to see the stock break below 55 (intraday low) on stronger volume for taking further positions. In a market bounce, the support can foot the stock for a move back up to the 18 day MVA; if JNPR breaks the resistance, look for a trading play up to 72. That would be a good bear market rally indeed.
BUY POINT: Downside: On a move below 54.88 on rising volume, for a move down to the 49-50 range. Upside: Over 65 on rising volume.
POSITION: Puts: April $75 or $80 puts to buy (JUX PO or JUX PP). Upside: Stock and/or July $60 calls to buy (JUX GL).
http://www.investmenthouse.com/cd/jnpr.html
(Click to view the chart)
Other Continued Puts:
IMPH (Impath Inc--$40.00; -4.94; optionable (QPH)): Health Services
STATUS: Finally dropped for the put play, and may be ready to offer more. The move down was on lower volume (248,100; avg. 342,045), but if the stock is hit with some selling it can fall to 35 (our target). The stock may move back up to attempt another test of the 200 day MVA (45.43) though potential resistance at 41-42 can hold it back from that move. We will look at more puts on a move down from this resistance (or 200 day MVA) and break below 40 on strong volume. Target would be 35.
BUY POINT: On a move down after a retest of the 200 day MVA or 41-42, looking for increased, above average volume on the selling.
POSITION: April $50 puts to buy (QPH PJ).
http://www.investmenthouse.com/cd/imph.html
(Click to view the chart)
SEBL (Siebel Systems Inc--$25.75; -3.00; optionable (SGW)): Computer Software & Services: Application Software
STATUS: Opened higher (10 day MVA, 31.18), but headed down from there on stronger volume (29.8 million; avg. 14.7 million), closing just above the March low of 25.13. On a break below that low on continued strong volume in a selling market, we will look at buying puts on the stock. If SEBL bounces back from here for a move back to the 10 day MVA in a market rebound, we can play the stock up to that resistance, and possible higher if it can break it.
BUY POINT: Downside: On a move below 25.13 on continued strong volume, April $35 puts to buy (SGW PG). Upside: On a bounce from here on strong volume, May $25 calls to buy (SGQ EE).
http://www.investmenthouse.com/cd/sebl.html
(Click to view the chart)
LNCR (Lincare Holdings Inc--$54.19; +0.69; optionable (LQN)): Health Services
STATUS: Tried to move over the short term moving averages (55), hitting a high of 55.56, but volume prevented the move from sticking, down at 494,200 (avg. 746,000). The stock is holding support at the 50 day MVA for the second day, but still fighting with the upper resistance. We will look at put positions on a move back below 53 (50 day MVA) on strong volume. Be ready to close the position on a move up over the upper resistance on stronger volume. Target for the put play: 44-46.
BUY POINT: On a move back below the 50 day MVA (53.32) on continued strong volume, April $60 puts to buy (LQN PL).
http://www.investmenthouse.com/cd/lncr.html
(Click to view the chart)
OEX (Standart & Poors 100--$600.71; +4.61; optionable (OEY)):
STATUS: Moved up slightly on lower, average volume (1.2 million), closing off the high of 605.36. On a move below the low of 597.79 on strong volume we will look at buying more puts.
BUY POINT: On a move below 597 on stronger, above average volume, March $605 puts to buy (OEY OC). Deltas not available at the time of this writing, though this should be a delta of 0.7 or better. Please check with your broker in the morning.
http://www.investmenthouse.com/cd/$oex.html
(Click to view the chart)
VRTS (Veritas Software--$54.38; -5.31; optionable (VUQ)): Computer Software & Services: Application Software
STATUS: We were looking for a move up to the 18 day MVA, and the stock did just that, gapping open at the resistance then heading down on stronger volume (22.1 million; avg. 13 million). The stock closed above the March low of 52.13, and on a move below that possible support, we will look at puts again. On a bounce that follows that of the market, the stock will offer the upside play, but look for resistance at 60 (10 day MVA) or the 18 day MVA (64).
BUY POINT: Downside: On a break below 52 on continued strong volume. Upside: On a bounce from here on continued strong volume.
POSITION: Downside: April $85 puts to buy (VUQ PU). Upside: Stock and/or May $50 calls to buy (VIV EJ).
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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us stock market
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