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Begin Part 2 of 3
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SUBSCRIBER QUESTIONS
Q: [Wednesday's] comments by the CFO at MSFT were the lamest excuse I've seen for a market to rally. Once CNBC actually read the statements at 3:20, the market sold off. We also find out later that buy programs at 2:00 caused the rally. (Well timed plunge control?) If people listen to CNBC during the day they either never find out what's going on in the market or find out too late.
Why is there so much concern about building fire walls between analysts and investment banking? Why don't companies just keep their "valuable" research and opinions to themselves and to their clients. They only seem to use their up and down grades to move the market to help themselves and the retail investor can go broke without their help. Since it is proven that they have helped to defraud investors with their comments, why isn't the remedy to cease and desist instead of paying a fine?
A: Good obervations. With respect to the buy programs moving the market, you have seen the power of big money when it decides to enter or leave the market. There has always been a lot of commentary about how the retail investor (the 'day traders,' etc.) were running the market up and down in 1999 and 2000. Just Wednesday there was one analyst bemoaning how there was 'mass amnesia' among individual investors as they were buying up internet and tech stocks and running them higher. Sorry, but it was clear at the time and it is clear now that the market is moved by institutions and the hedge funds. With the average volumes on individual stocks and in the market overall there is no way Joe, Bob, Nettie, Janice, etc. sitting at their computers or calling up the broker were causing mass swings in the market, particularly with the current low participation from the retail investor right now. Surely they were not driving AMZN higher when it was over $300/share and trading 7 million shares per day. It is a fact of investing that funds with a lot of money are going toenter and exit the market at certain points based on computer programs that gnerate buy and sell signals according to the investment program parameters the fund is pursuing at that time.
As for the research opinions, it has long been a bone of contention with us (indeed we wrote on the matter several times in 2001 before all of the corporate issues and their incestuous relationships with investment bankers and analysts) but from the other side: if we are a brokerage client, why are we not alerted to these analyst calls that negatively impact the stocks that our brokers were just touting the week before? Many people gave them $ to invest and took their advice and then saw their shares hit by an adverse analyst call from the same brokerage. Talk about abuse of the trust relationship. We still cannot believe there were not class action lawsuits on this as well as congressional investigations given the propensity to sue and Congress' oversized nose it likes to but into all issues.
The point: brokerage research is mostly a sham as you have indicated, designed to move the market to help their own investments and the investments of a very few, elite clients. All of the current 'transparency' has not changed this conflict because they still do not require their top guns to let their front line brokers in on the information and let them disseminate it to their clients first. That just underscores that the analyst calls are used for publicity for the firm as well as for the benefit of a few.
THE PLAYS:
Best Plays:
1) SOX: 50 day MVA bounce ahead.
2) AFCO: Very nice consolidation.
3) AVP: Very nice base.
4) AVID: Ready for the next move up.
5) BBOX: Good test looks ready for a bounce.
6) DMRC: Good handle.
7) SJM: Great pattern as well.
8) VIP: good test and looks ready for the next leg.
9) VZ: Looks like a shakeout Friday.
New Plays:
$OEX (S&P 100 options--$464.42; +2.75; optionable): S&P 100
http://biz.yahoo.com/p/$/$oex.html
STATUS: Testing the 50 day MVA. The S&P 100 tested just below the 50 day MVA on the Friday low (455.94) and bounced. You want to see a good jump off the 50 day and OEX did that though volume was not very impressive. It made a higher low, however, and with the economic team shakeup we anticipate the volume to come in for another upside rally.
Volume: 1.233M Avg Volume: 1.55M
BUY POINT: $466.74 Volume=1.5M Target=$486 Stop=$455.45
POSITION: OXB AM - January $465c (53 delta)
http://www.investmenthouse.com/ct/$oex.html
$SOX (Philly Semiconductor Index--$331.35; -0.29; optionable): Chip index
http://biz.yahoo.com/p/$/$sox.html
STATUS: Testing the 50 day MVA. The chips have rallied hard and spent the last week pulling back, the subject of various downgrades and negative comments all based on valuation. Now they have run a long way, but there are still good things happening. Over the past three weeks several chip stocks have affirmed or raised guidance. Friday NSM (National Semi) beat the street by 7 cents and increased its guidance going forward. Many chip stocks pulled back to the 50 day MVA, a good place for them to continue the move higher. We are looking at catching the next move up as the moves can be fast.
Volume: 3.753M
BUY POINT: $335.15 Volume=0 Target=$385 Stop=$324.94
POSITION: SOY AG - Jan $355c (53 delta)
http://www.investmenthouse.com/ct/$sox.html
Play Date: 12/07/2002
AFCO (Applied Films--$19.52; -0.22; optionable): Semiconductors
http://biz.yahoo.com/p/a/afco.html
STATUS: Testing the breakout. Unlike many chips, AFCO was very stingy with its gains last week, holding solidly above the 10 day MVA on much lower, below average volume. Friday it showed a doji with a long tail right over the 10 day MVA at 18. Accumulation is positive and money flow is strong. Really like that it held onto the gains. Nice.
Volume: 118.1K Avg Volume: 175K
BUY POINT: $20.85 Volume=225K Target=$25 Stop=$18.79
POSITION: UOF DW - April $17.50c (55 delta, low OI) and/or Stock
http://www.investmenthouse.com/ct/afco.html
BGEN (Biogen--$43.33; +0.47; optionable): Biotechnology
http://biz.yahoo.com/p/b/bgen.html
STATUS: Testing the 18 day MVA. BGEN continues to work its way off the lows, stair stepping up the 18 day MVA (42.27) and showing solid accumulation as it does with 8 accumulation weeks to 6 distribution weeks with money flow way up ahead of the price. A very nice, orderly consolidation that can provide a great return.
Volume: 2.378M Avg Volume: 3.6M
BUY POINT: $43.94 Volume=4M Target=$51 Stop=$40.86
POSITION: BGQ DH - April $40c (72 delta) and/or Stock
http://www.investmenthouse.com/ct/bgen.html
Play Date: 12/07/2002
SAFC (Safeco--$35.69; -0.18; optionable): P&C Insurance
http://biz.yahoo.com/p/s/safc.html
STATUS: Cup w/handle. SAFC has formed its second short cup base in the past 4 months, building the current 7-week base on top of the prior one. The past week it traded in a narrow range on lower, below average volume. Friday it showed a very tight doji right on the 18 day MVA. Accumulation in the base is 2 up weeks on rising volume and 1 down week on rising volume. Money flow is solid. We are looking at options on this play.
Volume: 868.306K Avg Volume: 1M
BUY POINT: $36.69 Volume=1.5M Target=$41 Stop=$34.12
POSITION: SAQ EF - May $30c (70 delta, low OI) or SAQ EG - May $35c (65 delta)
http://www.investmenthouse.com/ct/safc.html
Play Date: 12/07/2002
TK (Teekay Shipping--$37.18; +0.48; optionable): Shipping
http://biz.yahoo.com/p/t/tk.html
STATUS: Cup w/handle. Looks to have formed the handle to its 6-month base, moving up off the 18 day MVA Friday on a strong shot of above average volume. Money flow is moving up ahead of the stock even as it moves laterally. That is action that has paid off well during this rally. TK is obviously building in an economic recovery with this pattern, and now we are looking for a breakout on strong volume. With the good move Friday, aggressive positions can be taken before that.
Volume: 194.9K Avg Volume: 155K
BUY POINT: Aggressive: 37.65. Breakout: $39.25 Volume=235K Target=$46.65 Stop=$36.15
POSITION: TK DG - April $35c (75 delta, low OI) and/or Stock
http://www.investmenthouse.com/ct/tk.html
CONTINUING PLAYS:
Upside:
Play Date: 12/07/2002
AVID (Avid Technology--$19.43; +0.28; optionable): Consumer electronic equipment
http://biz.yahoo.com/p/a/avid.html
STATUS: New buy point. AVID is moving laterally, closing on the 10 day MVA after intdraday tests of the 18 day MVA (18.28). Friday AVID got a big shot of volume, moving well above average. It looks ready to make its next move. A huge performer for us thus far.
Volume: 515.3K Avg Volume: 343K
BUY POINT: $19.65 Volume=500K Target=$23.65 Stop=$18.05
POSITION: AQI FW - June $17.50c (71 delta, low OI) and/or Stock
http://www.investmenthouse.com/ct/avid.html
Play Date: 11/25/2002
AVP (Avon Products--$52.37; +0.79; optionable): Cosmetics and personal products
http://biz.yahoo.com/p/a/avp.html
STATUS: Double bottom w/handle. Getting a bit volatile, but still holding the 18 day MVA on the lows and making a solid move Friday. Volume edged higher as AVP appears to be readying for its breakout. Great accumulation and super movney flow surging up ahead of the price. As we said before, it may not be the sexiest type of stock, but it sure has the right attributes to be a nice winner for us.
Volume: 1.118M Avg Volume: 1.269M
BUY POINT: $52.94 Volume=1.8M Target=$61 Stop=$50.25
POSITION: AVP DJ - April. $50c (66 delta) and/or Stock
http://www.investmenthouse.com/ct/avp.html
Play Date: 11/14/2002
BBOX (Black Box--$47.75; +0.13; optionable): Networking
http://biz.yahoo.com/p/b/bbox.html
STATUS: Testing the 18 day MVA. Very nice, lower volume pullback to the 18 day MVA where it held Friday and tried to make a bounce. It did not get the volume though it did edge higher. Very solid money flow. Accumulation is good at 8 up weeks on rising volume to 5 down weeks on rising volume. Very nice test and looks ready to make a good bounc.
Volume: 278.15K Avg Volume: 398.181K
BUY POINT: $48.45 Volume=550K Target=$56 Stop=$46.65
POSITION: QBX CI - Mar. $45c (64 delta) and/or Stock
http://www.investmenthouse.com/ct/bbox.html
Play Date: 11/30/2002
DMRC (Digimarc--$15.38; +0.07; optionable): Security software
http://biz.yahoo.com/p/d/dmrc.html
STATUS: Cup w/handle. Very nice pullback to the 18 day MVA (15.31) on lower volume to form the rest of the handle to the 8-month base. Money flow is huge. Accumulation is solid at 9 accumulation weeks to 5 distribution weeks. Sercurity software is one sector that has performed well but then pulled back the last week. DMRC had a mild pullback and looks ready to make the next move up.
Volume: 29.78K Avg Volume: 65K
BUY POINT: Aggressive: 16.05; Breakout: $17.01 Volume=100K Target=$20.45 Stop=$15.65
POSITION: DQT EC - May $15c (66 delta, low OI) and/or Stock
http://www.investmenthouse.com/ct/dmrc.html
Play Date: 12/05/2002
ICOS (Icos Corp.--$31.01; +0.51; optionable): Drug manufacturer
http://biz.yahoo.com/p/i/icos.html
STATUS: Testing the breakout. ICOS broke out of its 3-month cup w/handle base in November, and spent last week testing the move. Friday got a bit wild with a test down to the 200 day MVA on the intraday low near 28. The stock shot right back up and scored a session gain on some rising though still below average volume. The test lower held support from the August and mid-November highs. Looks ready to make the move as volume starts coming back in.
Volume: 846.401K Avg Volume: 1M
BUY POINT: $31.45 Volume=1.2M Target=$38 Stop=$29.25
POSITION: IIQ DF - April $30c (60 delta) and/or Stock
http://www.investmenthouse.com/ct/icos.html
Play Date: 11/30/2002
ISSX (Internet Security System--$22.15; -0.46; optionable): Internet security
http://biz.yahoo.com/p/i/issx.html
STATUS: Testing the 18 day MVA. ISSX did not snap right back off the Wednesday doji, but suffered a drop Thursday on some big volume. Friday it showed yet another tight doji right at support at 22. The break below the 18 day MVA is not our favorite action, but the sector has been a leader. What we want to see is ISSX jump up off 22 with a good volume surge. If volume is good we can add to positions right off, but a move over 24 clears some resistance.
Volume: 2.297M Avg Volume: 2.025M
BUY POINT: Aggressive: over 23 on very strong volume. The 24.35. Volume=2.5M Target=$31 Stop=$23.3
POSITION: ISU DX - April $22.50c (72 delta) and/or Stock
http://www.investmenthouse.com/ct/issx.html
Play Date: 12/04/2002
MSN (Emerson Radio--$4.50; -0.10; no options): Electronic equipment
http://biz.yahoo.com/p/m/msn.html
STATUS: Cup w/handle. Friday may have been the shakeout that clears the way for another move higher. MSN tested down below the 10 day on the low (4.20) and hten snapped back as volume edged higher. A good lateral test of the breakout and a shakeout on top of it. Looking for the next move to take on some new positions.
Volume: 95K Avg Volume: 148K
BUY POINT: $4.85 Volume=150K Target=$6.35 Stop=$4.51
POSITION: Stock (no option chain)
http://www.investmenthouse.com/ct/msn.html
Play Date: 11/23/2002
PVSW (Pervasive Software--$4.08; -0.06; no options): Application software
http://biz.yahoo.com/p/p/pvsw.html
STATUS: Cup w/handle. Flat, tight handle that holds above the 18 day MVA on the lows (4.02) as volume has dried up so much it is a veritable desert. Money flow reamins strong during this consolidaiton in the handle of the year-long base. Accumulation is solid at 8 up weeks on rising volume to 5 down weeks on lower volume. Just waiting for the breakout.
Volume: 8.2K Avg Volume: 61.818K
BUY POINT: $4.27 Volume=125K Target=$5.35 Stop=$3.97
POSITION: Stock (no option chain)
http://www.investmenthouse.com/ct/pvsw.html
Play Date: 12/04/2002
QCOM (Qualcom--$41.48; +1.9; optionable): Telecom equipment
http://biz.yahoo.com/p/q/qcom.html
STATUS: Test 18 day MVA. Jumped off the 18 day MVA Friday, making the positions taken on the Wednesday alert look good as volume spiked up above average. Still a buy at this point on the bounce.
Volume: 21.023M Avg Volume: 17M
BUY POINT: New: $42.05 (orig. $40.85) Volume=18M Target=$50 Stop=$37.99
POSITION: AAW DU - April $37.50c (67 delta) and/or Stock http://www.investmenthouse.com/ct/qcom.html
Play Date: 12/02/2002
SJM (JM Smucker--$38.83; -0.17; optionable): It's got to be good jam.
http://biz.yahoo.com/p/s/sjm.html
STATUS: Testing the breakout. Just looking very good in the test, showing a very tight doji Friday that tapped the 18 day MVA on the low (38.44) and rebounded to close basically flat. Volume has really dried up during the test, a perfect shakeout. Accumulation is solid at 3 accumulation weeks to 1 distribution week. Looks super.
Volume: 162.4K Avg Volume: 307.636K
BUY POINT: $40.15 Volume=476K Target=$48 Stop=$37.65
POSITION: SJM DJ - April $35c (77 delta) and/or Stock
http://www.investmenthouse.com/ct/sjm.html
Play Date: 11/12/2002
UTHR (United Therapeutics--$17.28; +0.08; no options): Drugs
http://biz.yahoo.com/p/u/uthr.html
STATUS: Cup w/handle. Still working laterally along the 10 day MVA at 17 on very low volume, , forming a small wedge the past three weeks. Money flow continues up ahead of the stock, price/volume action is good. Looks ready, now it has to move.
Volume: 58.794K Avg Volume: 168.136K
BUY POINT: $17.65 Volume=295K Target=$21.45 Stop=$16.21
POSITION: Stock (no option chain)
http://www.investmenthouse.com/ct/uthr.html
Play Date: 12/07/2002
VIP (Vimple Communication--$33.9; -0.28; optionable): Wireless
http://biz.yahoo.com/p/v/vip.html
STATUS: Testing the breakout. After a super move that put some nice change in the pocket, VIP has come back to test the breakout, holding at the 10 day MVA (34) and showing a very tight doji on very low volume Friday. After being a bit wild on the selling early in the week, VIP ahs held its ground last in the week. On a move up on more volume this is a good place to enter new positions or add to positions.
Volume: 101.2K Avg Volume: 225K
BUY POINT: $34.85 Volume=300K Target=$40 Stop=$32.41
POSITION: VIP DF - April $30c (75 delta) and/or Stock
http://www.investmenthouse.com/ct/vip.html
Play Date: 12/04/2002
VZ (Verizon Communications--$40.19; +1.12; optionable): Telecom
http://biz.yahoo.com/p/v/vz.html
STATUS: Testing the 18 day MVA. VZ did not stop at the 18 day, but gapped down to the 200 day MVA Friday; it had done well so it was the target of those rushing out of the market. We sat tight and sure enough VZ came roaring back, up $2 off the intraday low to post a gain on rising though still below average volume. A very good recovery; buyers were ready to jump back into the stock when they perceived a bargain. Money flow is huge and turned back up already even as the stock was pulling back. Looks super for new and additional positions.
Volume: 7.698M Avg Volume: 8.235M
BUY POINT: $41 Volume=11M Target=$47.5 Stop=$38.13
POSITION: VZ DU - April $37.50c (67 delta) and/or Stock
http://www.investmenthouse.com/ct/vz.html
End Part 2 of 3
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