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us stock market, stock watch
Begin Part 2 of 2
TEAM TRADES
ISSX is a stock we have been following on the reports that has really hit rough times. It has been an excellent downside play, and it keeps giving additional opportunities to enter. Friday it made a quick move down, and we were looking for it to take out its recent low at 35.88 for additional positions. It had closed at 37 after a strong drop Thursday, and gapped down to 36.56 to open, and then quickly dropped off to 35 in the first five minutes. We saw the stock take a quick bounce back up in the next 15 minutes, but it did not go back above our buy point. In fact, as we were reaching the half-hour point in the day the stock turned back down with a good spike of volume, and the market was experiencing a sizable drop of its own. We were looking initially at April $50 puts, but were getting screwy bids and asks on them, so focused on the 45's, which were showing a strong delta over 70. We were taken out on the options at 11.875 as the stock hesitated and climbed for a moment, and then and watched as the stock dropped to 33.50. It had us a bit worried when it edged back up over the next couple of hours, coming all the way back up to our buy point, but it then dropped off with the market the rest of the afternoon, with the options finally closing at a bid of 12.625. We decided to go ahead and ride them further as the momentum was down at the close and down Friday's often give us a down Monday, at least at the open. That should build another nice profit in to the downside.
For a review of frequently asked questions, please use the link below:
http://www.investmenthouse.com/1questions.htm
All prices reflect prices at the close on Friday.
NOTE: Stop losses are plotted at one-quarter to one-half point below pivot points.
Best Plays: We have shaken out several stocks that succumbed to the bear market (CNX, CORS, WFT, SDS, YUM, NVLS, JLG, LIN, ADSK, etc.). New plays such as GADZ, ESCM, SLOT and CHBS look good while several continued plays hold patterns and support (STZ, HSIC, RE, LOW). Several puts, IFIN, DS, BOBJ, IMPH, ISSX, the DJX, QQQ and OEX indexes really delivered for us on put plays.
Best Plays, Part 1:
1) GADZ: A strong breakout that the aggressive can play from here.
2) ESCM: Moving into a breakout.
3) STZ: Holding its lateral consolidation.
4) CHBS: A doji on low volume.
5) HSIC: Low-volume pullback to support.
6) RE: Ditto.
7) Puts: SOX-X, OEX
BREAKOUTS: We are looking for targets on breakout 10-15% above the buy point, adjusted from the usual bull market 15-20%.
New Play:
GADZ (Gadzooks Inc--$23.13; +1.07; optionable (EQK)): Retail: Apparel
http://biz.yahoo.com/p/g/gadz.html
STATUS: Broke out of a v-bottomed base on excellent volume (473,600; avg. 131,318), running up toward completion of its much larger, almost year-long base (previous high is 23.75). We covered the stock's ascending wedge of last fall, but GADZ corrected back below the 200 day MVA (15.69) in December. The stock is currently too extended on this breakout for standard entry points (limit is 22.85), but we will look for a pullback and test (which will likely be a handle to the larger base). The aggressive can play this up on the momentum, however. Strong volume on the move. Excellent money flow and buying, and relative strength broke out.
BUY POINT: Aggressive: Up from here on continued strong volume. Pullback: On a move back up after a test of the 21.76 range (buy point).
POSITION: Aggressive: Stock and/or June $22.50 calls to buy (EQK FX). Pullback: Stock and/or June $20 calls to buy (EQK FD, 31 open interests).
Continued Plays:
BKLY (W.R. Berkley Corp--$45.75; -0.94; no options): Insurance
http://biz.yahoo.com/p/b/bkly.html
STATUS: Dropped below the 10 day MVA (46.24) and headed for the 18 day MVA, testing that support on the low of 45.31. Volume remained well below average but somewhat higher at 221,000 (avg. 347,545). We look for a another test of the 18 day MVA, then want to see the stock move up for a breakout over that handle high of 48.75.
At this point, still a decent pattern. Initial profit target: 54-56.
BUY POINT: 48.88, on volume of 521,000 or better. Stop loss: 48.38-48.63.
POSITION: Stock.
READY TO BREAK TO A NEW HIGH (or just did):
New Play:
ESCM (Esc Medical Systems Ltd--$21.75; +1.75; optionable (QFC)): Wholesale Medical Equipment http://biz.yahoo.com/p/e/escm.html
STATUS: Moving up on strong volume after testing the 18 day MVA (19.78) on a test of its recent breakout. The March high is 22.38 for possible positions with stock and/or calls to buy. Volume was strong, pushing the stock higher, at 737,000 (avg. 311,272). ESCM shows huge money flow and strong buying, and relative strength has broken out ahead of price, a bullish indicator. Initial profit target: 25-26.
BUY POINT: 22.51, on volume of 995,000 or better. Stop loss: 22.51-22.26.
POSITION: Stock and/or July $20 calls to buy (QFC GD).
Continued Plays:
HI (Household International--$60.02; -0.34; optionable (HI)): Financial
http://biz.yahoo.com/p/h/hi.html
STATUS: HI continues to hold at the 10 day MVA (59.81), tested on the low of 59.75. The stock showed a doji off the high of 60.95 as volume shot even higher above average to 3 million (avg. 1.8 million). 61 continues to pose resistance, and this strong volume is what the stock needed to break it. We will look for a hold here or at the 18 day MVA (59.40) if not an immediate move up from the doji. HI made a nice run up from the 50 day MVA beginning late February, and is trying to establish another run from support of the up trendline (connecting November, February and March lows). That puts the trendline, for now, at 59. Initial profit target on a move over 62: 68-71.
BUY POINT: Over 62, on continued strong volume. Stop loss: 61.50-61.75.
POSITION: Stock and/or July $55 calls to buy (HI GK).
TESTS OF THE BREAKOUT: Some of these stocks are moving back on low volume to test the breakout. We often take profits on option plays when they start to pullback on the breakout move and then get back in when the stock bounces up off of the breakout point. This second move is where some of the biggest gains are made.
Continued Plays:
From the Thursday update:
STZ (Constellation Brands Inc--$68.88; -0.37; optionable (STZ)): Food & Beverage: Wineries
http://biz.yahoo.com/p/s/stz.html
STATUS: Continues to move in a tight little consolidation that is testing its recent breakout from a pennant-type pattern. The stock pulled back from the breakout high of 70.50, on steadily declining volume, which popped back up Friday as the stock reached up to an intraday high of 70.38 (178,200; average 135,500). Price is holding nicely above the previous high in the pattern (68.59) and the 10 day MVA (68). STZ shows strong money flow and buying, and relative strength is out ahead of price, a bullish indicator. Initial profit target: $81-$85.
BUY POINT: Breakout: 70.63, on volume of 180,000 or better. Stop loss: 70.13-70.38.
POSITION: Stock and/or July $70 calls to buy (STZ GN).
WEDGES, PENNANTS, and FLYING PLATEAUS (AND FLAGS): These are some of our favorite patterns as the moves can be explosive. In this market, however, we need to see the move on the breakout on strong volume.
Pennant:
New Play:
SLOT (Anchor Gaming--$53.06; +0.31; optionable (QLT)): Leisure: Gaming
http://biz.yahoo.com/p/s/slot.html
STATUS: In a pennant pattern (high of 56.25) that is testing the breakout from a recent base. Stronger volume (187,100; avg .243,636) popped the stock up a few cents higher, the stock showing a tight doji at the top of the intraday range (the low tested support at the 18 day MVA (51.60). That action can signal a continued move up on even stronger volume, though we will watch for a pullback to the 10 or 18 day MVAs (10 day MVA, 51.93). Strong money flow and high relative strength that has moved out ahead of price.
Initial profit target on a breakout: 62-65.
BUY POINT: 56.38, on volume of 329,000 or better. Stop loss: 55.88-56.13.
POSITION: Stock and/or July $50 calls to buy (QLT GJ, 15 open interests).
BASING/TRADING RANGES: Lots of patterns breaking down. That is a sign of a weakening market. Make sure of the breakout and then set stops just below the pivot point. Follow gains up with trailing stops.
New Play:
CHBS (Christopher & Banks Corp--$30.88; -0.18; no options): Retail: Apparel
http://biz.yahoo.com/p/c/chbs.html
STATUS: In a very short double-bottom with handle pattern. Volume continued to drop off to very low levels (83,600; avg. 277,363) as the stock closed on a tight doji. The doji and low volume suggests a move up from here, and we will look for a breakout over the handle high of 32.38. The 10 day MVA is below at 30.05. Strong money flow and buying, and relative strength is out and ahead of price, a bullish sign. Initial profit target: 36-37.
BUY POINT: 32.51, on volume of 416,000 or better. Stop loss: 32.01-32.26.
POSITION: Stock.
NI (Nisource Inc--$29.58; +0.06; optionable (NI)): Utilities
http://biz.yahoo.com/p/n/ni.html
STATUS: Moving up from support in an 11-week cup base, as volume picked up nicely above average (1.25 million; avg. 861,772). Trying to move up after a handle pullback (from a previous handle high of 29.62), the stock hit a high Friday of 29.95 before pulling back below that earlier high. Looking for a move up on stronger volume to break the stock up toward completion of this base (bottom is at 26). The stock shows decent buying and a high relative strength (that has broken out ahead of price, bullish). Initial profit target: 33-35.
BUY POINT: 30.08, on volume of 1.3 million or better. Stop loss: 29.55-29.83.
POSITION: Stock and/or July $25 calls to buy (NI GE).
Continued Plays:
From the Thursday update:
HSIC (Henry Schein Inc--$32.75; -0.63; optionable (HQE)): Medical Equipment Wholesale
http://biz.yahoo.com/p/h/hsic.html
STATUS: Continued pulling back in the handle of a double-bottom pattern of almost three months duration. Volume has settled down the last couple of sessions, what we like to see in a handle, dropping back Friday to 195,300 (average 421,200) as the stock continues to hold its 10 day MVA (32.68). Looking good, and we are still watching for a breakout over the handle high of 34.63. Outstanding money flow and buying. Initial profit target: $38-39.
BUY POINT: 34.76, on volume of 632,000 or better. Stop loss: 34.26-34.51.
POSITION: Stock and/or July $30 calls to buy (HQE GF).
Continued Plays:
RE (Everest Re Group Ltd--$63.69; -0.26; optionable (RE)): Insurance
http://biz.yahoo.com/p/r/re.html
STATUS: Continues its gradual descent in the handle of the (now) 11-week cup base, as volume declines even further (dropping Friday to 153,900; avg. 467,181). This has been a good-looking pullback, just what we like for handles. On a breakout over the pattern high of 67.75, we will look at taking positions with stock or options. Initial profit target: 75-78.
BUY POINT: Breakout: 67.88 on volume of 715,000 or better. Stop loss: 67.38-67.63.
POSITION: Stock and/or July $60 calls to buy (RE GL 12 open interest).
LOW (Lowe's Companies Inc--$59.98; -0.72; optionable (LOW)): Retail
http://biz.yahoo.com/p/l/low.html
STATUS: After testing the 18 day MVA (58.49) Wednesday, the stock popped up Thursday on decent volume then fell back just a little on a volume pullback next session (3 million; avg. 3.1 million). The doji on the lower volume (the low of 59.10 tested below the 10 day MVA, 59.59) signals a possible move back up, and since price/volume action has looked good the last couple of days, we will look for that move. Initial profit target on a move over the March high of 62.95: 69-72.
BUY POINT: A move over 62.95 on above average volume (in the range of 4 million). Stop loss: 62.45-62.70.
POSITION: Stock and/or July $55 calls to buy (LOW GK).
Put Plays: We continue to look at put plays since sentiment is generally against a market bounce on the anticipated 50-point interest rate cut. 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.
New Put:
SOX (Philly Semiconductor Index--$541.26; -30.15; optionable (SJX)):
STATUS: Has formed a bearish head and shoulders pattern, the right shoulder from its hump in early March. The right shoulder was lower than the left (formed in December), signaling a potential deeper plunge ahead. On a break below the neckline in the 535 range, the index can fall the height of the pattern, or about another 200 points. Not all at once, but that is the potential. On the break we will look at buying puts. The index hit 535.40 twice in December. Initial profit target: March low of 515.30.
BUY POINT: On a move below 535 in market selling, May $590 puts to buy (SJX PB).
Continued Puts:
DJX ($98.23; -2.08; optionable (DJV)):
STATUS: Headed down as the index broke below the 100 support as expected (the index moved up to test the break of support before heading down. Volume was higher, and we continue to look for a move down from here in a continued negative market, on a move below the October low (95-96 range). Initial profit target: $83-$78.
BUY POINT: Aggressive: From here on continued strong volume. Safer: Below 95 on continued strong volume.
POSITION: May $104 puts to buy (DJV QZ).
OEX (Standart & Poors 100--$587.94; -12.77; optionable (OEY)): S&P 100 options
STATUS: Headed down on much stronger volume. The index shows a pattern of taking a day of rest between moves down, and has been slowing on the drops, even with Friday's stronger volume (1.5 million; avg. 1.2 million). So, we may see an attempted bounce higher. We can play either move. On a move down from here on continued strong volume, we will look at further put positions. The index broke below Wednesday's new 52-week of 589.89. Initial profit target on continued selling: $500-$470.
BUY POINT: On a move down on stronger, above average volume, May $590 puts to buy (OEB QR) (we will check our broker for spreads and deltas, not yet available at the time of this writing). On a failed test of 600 with May $600 puts to buy.
JPM (JP Morgan Chase & Co--$44.17; -1.09; optionable (JPM)): Financial
http://biz.yahoo.com/p/j/jpm.html
STATUS: Moved down on stronger, average volume (9.35 million), following Thursday's weak move up on lower volume. Looking for continued weakness and a drop, perhaps to October-December consolidation levels around 37.50, but we are first looking at 40 as our initial profit target.
BUY POINT: On a continued move down on stronger, above average volume.
POSITION: May $55 puts to buy (JPM QK).
QQQ (Nasdaq 100--$40.89; -1.26; optionable (QQQ)):
STATUS: After hitting a high of 44.25 Friday (in a test of the 10 day MVA at 44.83), the index broke just below recent support (previously noted in the 42 range) as volume held above average at 73.5 million (avg. 63 million). Showing a doji, the index can try a move up, but if the 42 resistance prevents that, we will look for a move down on stronger volume. Initial profit target: $34-$35.
BUY POINT: On a move down after a test of 42, on stronger volume.
POSITION: May $54 puts to buy (QQQ QB). Please confirm correct option symbols with your broker Monday morning.
BOBJ (Business Objects--$28.56; -3.25; optionable (BBQ)): Software
http://biz.yahoo.com/p/b/bobj.html
STATUS: Broke the support level just under 32, and headed down on a strong shot of volume (2.3 million; avg. 890,227). The stock has possible support at 26.64, the January low, and on a move below that point on continued strong volume, we will look at buying puts. Initial profit target: 21-23.
BUY POINT: Aggressive: Down from here on continued strong volume. Safer: Below 26.64 on continued strong volume.
POSITION: May $30 or $35 puts to buy (BBQ QF or QG).
MERQ (Mercury Interactive--$35.75; -2.13; optionable (RQB or RBF)):
http://biz.yahoo.com/p/m/merq.html
STATUS: Has given steady returns all month. MERQ turned down Thursday from the 10 day MVA, moving down to a Friday doji just above support (tested on the low of 35.13). Volume was lighter at 4 million (avg. 4.6 million). The stock can bounce back up from here for another test of the 10 day MVA (43), a level from where we can play a possible move back down. We can also look at playing MERQ on a move down from here, on a break of support at 35. Initial profit target from 43: 35. Target on a break of 35, 28-35.
BUY POINT: On a move down after a retest of 43, or, on a break of 35 from here. On the latter move, the stock can move up to test 35 before moving back down.
POSITION: May $45 or $50 puts to buy (RBF or RQB QI or QJ). Please check with your broker Monday morning for correct option prefixes for May.
VRTS (Veritas Software--$55.13; +0.75; optionable (VUQ)): Computer Software
http://biz.yahoo.com/p/v/vrts.html
STATUS: Hit a low of 51.88 then moved up slightly on lower but still strong volume (19.2 million; avg. 13.4 million). The stock hit a high of 57.50, just under the 10 day MVA at 59.40; VRTS can try another test of the MVA; on the lower volume it is unlikely to move as high as the 18 day MVA at 63.43 (as it did Thursday before tanking back down) 60 looks like firm resistance for now. On a retest and move back down, we will look at puts, with a target of 52.
BUY POINT: On a move down after a retest of the 58 range, on strong volume in a selling market.
POSITION: Downside: May $80 puts to buy (VUQ QZ).
Good Investing!
Your Technical Traders Report Team
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 in 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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