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top stock pick, stock watch
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 on the weekend report made good moves: RESP, HSIC, and others continue to set up (AN, RAD). SHW and TRA delivered the move but need volume to surge back in. Please check out the new Up & Comers portfolios, featuring LNCR, HI, ANF, THQI, HI and LOW. EXTR and VRSN are possible trading plays as the market moves up prior to the FOMC meeting. Of course, this market continues to offer possible juicy put plays. Please see our note on them in that section.
Best Plays:
1) HSIC: Moving up on strong volume and ever so closer to a breakout.
2) RESP: A nice move up.
3) VRSN: Trading play on massive volume and a tight doji.
4) ANF: A new portfolio stock that is making a breakout move.
5) Puts: DJX, OEX
Updated double-bottom pattern:
HSIC (Henry Schein Inc--$33.94; +1.19; optionable (HQE)): Medical Equipment Wholesale
http://biz.yahoo.com/p/h/hsic.html
STATUS: Made a move back up in the handle of its double-bottom pattern of almost three months duration. The stock is getting closer to the buy point in the handle, with volume picking up, as we would like, coming in at 496,700 (average 421,200). Still looking good, and we are looking for a breakout.
BUY POINT: On a move to 34.76, on volume of 630,000 or better.
POSITION: Stock and/or July $30 calls to buy (HQE GF).
http://www.investmenthouse.com/cd/hsic.html
(Click to view the chart)
Other Updated Stocks:
Ascending wedge:
TRA (Terra Industries Inc--$3.87; +0.15; no options): Basic Materials Wholesale
http://biz.yahoo.com/p/t/tra.html
STATUS: Made the buy point of 3.85 on the breakout from the ascending wedge, but the stock saw some lower volume (117,700; just under average). We will want to see stronger volume for a continued breakout, and the stock remains a buy on the move if we get it. Initial profit target: 4.23-4.43.
BUY POINT: Up to 4.04, on volume of 186,000 or better. Stop loss: 3.35-3.60.
POSITION: Stock.
http://www.investmenthouse.com/cd/tra.html
(Click to view the chart)
RESP (Respironics Inc--$29.06; +2.00; optionable (SBU)): Health Service
http://biz.yahoo.com/p/r/resp.html
STATUS: Made the move; the change to proper price/volume action Friday (price moving up on higher volume) continued Monday as volume broke above average to 211,800 (avg. 230,000) and price soared. The aggressive can play this one up, but a more conservative approach to playing the stock is after a pullback to test 28-28.25 and picking it up from there. Money flow is strong. Initial profit target: $33-$35.
BUY POINT: From here; Pullback: After a move back to test 28 to 28.25.
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: While we continue to keep the previous leaders in the portfolio (eventually the majority will rebound, but that is far out in the future), they are not and have not performed for taking long-term positions. Some of the new leaders have fallen under the pressure of the bear market and can no longer be considered top picks for such investments (ACS, LLL, NATI, ESRX). We continue to look to stocks like SGR and CPN as the new leaders, as they are holding up well despite everything. With this in mind, we must reiterate that while we are looking for any of these stocks to once again yield long-term investments when the markets turns, for now the plays for moves up in such stocks should only be considered short-term. We must 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: CPN, SGR (ESRX, NATI, LLL, ACS)
Previous Leaders: ADBE, AMCC, ARBA, BEAS, BRCD, CIEN, EMC, EXTR, GLW, JNPR, NEWP, NTAP, PMCS, SCMR, SEBL, VRSN, VRTS,
SGR (The Shaw Group Inc--$44.00; -7.30; optionable (SGR)): Manufacturing: Industrial Equipment & Components
http://biz.yahoo.com/p/s/sgr.html
STATUS: Hit on news that a merger between FPL Group and Entergy is in question; the power plant developer counts both companies as customers. The stock sold below the 50 day MVA (48) on strong volume (3.8 million; avg. 425,000), moving up off the low of 40.70. The stock may find support at the 40 level for now, but we won't be looking at taking positions until we see a recovery at least back over the 50 day MVA.
http://www.investmenthouse.com/cd/sgr.html
(Click to view the chart)
Previous Leaders:
A couple of trading plays: These are quick upside plays if the market continues to rally into the FOMC meeting Tuesday.
EXTR (Extreme Networks Inc--$22.57; +3.66; optionable (EUD)): Internet: Internet Software & Services
http://biz.yahoo.com/p/e/extr.html
STATUS: The stock moved up on stronger volume (4 million; avg. 6.9 million), closing just under the 18 day MVA (22.84). If EXTR can break that resistance, we will look at possible positions for a quick trading play up to the 30 level as the market continues to move up prior to the Fed meeting Tuesday. 30 will be our target.
BUY POINT: Over 23 on continued rising volume.
POSITION: Stock and/or June $20 calls to buy (EUD FT).
http://www.investmenthouse.com/cd/extr.html
(Click to view the chart)
VRSN (Verisign Inc--$34.00; +0.06; optionable (VUQ)): Internet Software & Services
http://biz.yahoo.com/p/v/vrsn.html
STATUS: Showed its second consecutive doji, Monday's at the top of the intraday range (high is 35.44) as the stock reversed off the low of 29.88 on strong volume (15.4 million; avg. 7.1 million). That looks like a move up from here, so we are looking for a pop up to the 10 day MVA (39.02) in a continued market move up into the FOMC meeting. It is possible the stock can go as high as the 18 day MVA at 43.85, although our initial target will be 39.
BUY POINT: Up from here on the strong volume.
POSITION: Stock and/or June $30 calls to buy (QVR FF; 50 open interests).
http://www.investmenthouse.com/cd/vrsn.html
(Click to view the chart)
UP & COMERS PORTFOLIOS: We have added some new stocks to this portfolio (LNCR, BJ, ANF, LOW, HI and THQI). We like the patterns and how they are holding up in this market. The currently existing members (EXDS, TQNT, BVSN, SANM, PKI and GMST) are on a current watchlist we will continue to monitor for recovery when the market finally emerges from the bear market.
LNCR (Lincare Holdings Inc--$57.81; +2.81; optionable (LQN)): Specialized Health Services http://biz.yahoo.com/p/l/lncr.html
STATUS: We were watching LNCR as a possible put play after it began some selling that took it back under the 50 day MVA (53.65 currently), but the stock has a great track record and showed resilience and moved back up on good volume. Monday price broke above the short term moving averages, closing just short of resistance (58) as volume dropped back below average (619,100; avg. 762,318). Thus, the stock can pull back to the 56.50 range or the 18 day MVA at 55.24), unless volume surges back in as it did Friday (Monday was a below-average volume day on the Nasdaq). We look for a move over the December high of 61.25 for taking possible positions with stock and/or calls to buy. LNCR shows strong money flow and a relative strength that has moved out ahead of price, a bullish indicator.
Initial profit target: 67-70.
BUY POINT: Over 61.25 on volume of 836,000 or better. 60.75-61.
POSITION: Stock and/or May or August $55 calls to buy (LQN EK or LQN HL).
http://www.investmenthouse.com/cd/lncr.html
(Click to view the chart)
BJ (Bj's Wholesale Club Inc--$46.00; -0.13; optionable (BJ)): Retail: Discount, Variety Stores http://biz.yahoo.com/p/b/bj.html
STATUS: The stock has trended up nicely from a November low of 28.88 to a March high of 48.35, correcting back to test 44 (just above the 50 day MVA at 43.30) last week but moving back over the 18 day MVA (45.81). The stock is showing its third consecutive doji above that support, and just under the 10 day MVA (46.15). Volume was quite strong on Friday's doji, but dropped sharply back below average Monday to 645,300 (avg. 663,000), encouraging for a hold at this support level. On a move up and back over the March high, we'll consider positions with stock and/or calls to buy. The stock has outstanding money flow and high relative strength (that is out ahead of price).
Initial profit target: 53-56.
BUY POINT: Over 48.35 on volume in the range of 871,000. Stop loss: 47.85-48.10.
POSITION: Stock and/or June $40 calls to buy (BJ FH).
http://www.investmenthouse.com/cd/bj.html
(Click to view the chart)
ANF (Abercrombie & Fitch Co--$33.98; +2.11; optionable (ANF)): Retail: Apparel
http://biz.yahoo.com/p/a/anf.html
STATUS: We have covered ANF in this report off and on since early November, back when retail stocks were doing much better than they are now. ANF is another exception (BJ is another) in the current market, as it makes a breakout move Monday. The stock has carved its way just over halfway up the right side of a lengthy base (started July of 1999), and is looking good on this move, breaking over the previous March high on good volume (1.8 million; avg. 1.5 million). The move was fueled by an upgrade to "strong buy" by Tucker Anthony Sutro. The stock is still a buy on this move. ANF shows good buying, high money flow and relative strength. Initial profit target: 37-39.
BUY POINT: On this breakout, up to 35.46. Stop loss: 33.27-33.52.
POSITION: Stock and/or August $30 calls to buy (ANF HF).
http://www.investmenthouse.com/cd/anf.html
(Click to view the chart)
LOW (Lowe's Companies Inc--$61.25; +1.27; optionable (LOW)): Retail
http://biz.yahoo.com/p/l/low.html
STATUS: Another retail stock that is attempting to consolidate for a breakout move from a long base (start of the base is the April 2000 high of 67.25). The stock ran to a March high of 64.59 on good volume, then pulled back to test its 18 day MVA (58.78), then immediately jumping back up over the 10 day MVA (59.89). The stock moved up from support (10 day MVA, 59.89) Monday though volume was lower and below average (2.6 million; avg. 3.1 million). Unless volume surges back in, look for another pullback to support at the 60 level before a strong move up. Looking for that over 63 for possible positions. LOW shows strong money flow and high relative strength. Initial profit target: 69-72.
BUY POINT: Over 63 on volume of 3.5 million or better. Stop loss: 62.50-62.75.
POSITION: Stock and/or July $55 calls to buy (LOW GK).
http://www.investmenthouse.com/cd/low.html
(Click to view the chart)
HI (Household International--$59.90; -0.12; optionable (HI)): Credit Services
http://biz.yahoo.com/p/h/hi.html
STATUS: The stock has been uptrending steadily since February 2000 lows near 30, and is now consolidating for a move over the March closing high of 61.50. From support of the up trendline (November, February, and March lows), HI moved up on the day despite the overall loss, recovering from a low of 58.17. The stock hit a high at 60.29 on lower but still above average volume of 2.5 million (avg. 1.8 million). The 60-61 level (February high is 62) posed resistance over the last week, even on Thursday and Friday's stronger volume. We like the move up from the intraday low, however, and look for the 10 day MVA (59.83) to hold the stock here until volume surges. The 18 day MVA is at 59.45 on a move below the 10 day. HI shows outstanding money flow and high relative strength. Initial profit target: 68-71.
BUY POINT: Over 62, on continued strong but rising volume. Stop loss: 61.50-61.75.
POSITION: Stock and/or July $55 calls to buy (HI GK).
http://www.investmenthouse.com/cd/hi.html
(Click to view the chart)
THQI (Thq Inc--$33.00; +0.44; optionable (QHI)): Multimedia & Graphics Software
http://biz.yahoo.com/p/t/thqi.html
STATUS: In a 15.5-month cup with handle base, and making a move up from support (18 day MVA, 31.66) on stronger, average volume (416,500). The stock pulled back to the moving average in a bouncing, short ranging pattern as volume dropped below average the last two days of the previous week. We will call that a handle, and look for a continued move up from here for a possible breakout (handle high is 34.50). The stock has trended up nicely from May lows near $8, and is looking good to complete this base (previous high is 39.27). THQI has strong money flow and buying, and relative strength has moved out ahead of price, a bullish sign. Initial profit target: 38-39.
BUY POINT: 34.63, on volume of 626,000 or better. Stop loss: 34-34.38.
POSITION: Stock and/or June $25 calls to buy (QHI FE).
http://www.investmenthouse.com/cd/thqi.html
(Click to view the chart)
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 sure you see the downside move, along with the market going down as well, and then enter.
New Put:
IBM ($92.60; +3.40; optionable (IBM)):
http://biz.yahoo.com/p/i/ibm.html
STATUS: Volume fell from Friday's high levels of 17 million (10.2 million; 9 million) as price moved up from a low of 89.20. IBM has potential resistance at 94-95, so on a move up to that level we are going to watch for a turn back down for an initial target at the low (89). There is a lot of talk that IBM is about to announce that earnings will not be up to expectations. We are expecting a continued move up to the resistance as the market moves up to the FOMC meeting.
BUY POINT: On a move back down from 94-95, preferably on stronger (selling) volume.
POSITION: May $110 puts to buy (IBM QB).
http://www.investmenthouse.com/cd/ibm.html
(Click to view the chart)
SOX (Philly Semiconductor Index--$577.76; +36.50; optionable (SJX)):
STATUS: Moved higher and is approaching the 10 day MVA (at 588.19) on lower volume. If that level turns the index back down, we will look at some ripe put plays down to the 541 level (our initial target) on a move down below 571.41 (hit twice recently). On strong volume, however, that price should not restrain a move down.
BUY POINT: On a move down after a test of the 10 day MVA at 588 or the 18 day MVA at 600 in market selling, April $590 puts to buy (SJX PR) or April $600 puts to buy (SJX PT).
Continued Puts:
DJX ($99.59; +1.36; optionable (DJV)):
STATUS: Bounced back up from the 98 level (where the index closed Friday), approaching resistance at 100 (previous support) on lower, below average volume. Intraday high was 99.92. On a retest of 100, we will look for the index to head back down from there, for a move down to 98 or lower, to the October lows in the 95-96 range.
BUY POINT: On a move down from 100 on strong and rising volume. Safer: Below 98 on stronger volume.
POSITION: May $108 puts to buy (DJV QD).
QQQ (Nasdaq 100--$43.10; +2.21; optionable (QQQ)):
STATUS: Popped back up Monday, stopping short of recent highs in the 45 range. Volume was down at 52 million (average 63 million). We were looking at a move back down after a test of 42 for put positions, but we could get a bit more going into the rate cut, and from there we can see if we get a strong move down from the 45 range (10 day MVA at 44.55), and look at a put play. Initial profit target: $34-$35.
BUY POINT: On a move down after a test of the 45 range, on stronger, above average volume.
POSITION: May $56 puts to buy (QQQ QD).
JPM (JP Morgan Chase & Co--$45.15; +0.98; optionable (JPM)): Financial
http://biz.yahoo.com/p/j/jpm.html
STATUS: Tapped down to 42.65 at its intraday low Monday, but managed to push up and close above recent support at 43-44. Volume continued to rise, but the stock has to deal with recent resistance at 46 (now concurrent with the 10 day MVA), and 50 day MVA above that at 48.79. We will see how the stock responds tomorrow, watching for it to make a move on 46 or, if it gets past that, 48, and then fail and drop with increased selling volume. We will watch today's low for possible support, with the first target still 40 on the play (October-December consolidation levels around 37.50).
BUY POINT: On a drop back from 46-48, with increased selling volume (up to 9.68 million today; average 9.8 million).
POSITION: May $55 puts to buy (JPM QK).
http://www.investmenthouse.com/cd/jpm.html
(Click to view the chart)
OEX (Standard & Poors 100--$597.67; +9.73; optionable (OEY)): S&P 100 options
STATUS: Took a bounce back up, but closed back up in the range of last week's lows, and moving on lower volume (1.12 million; average 1.2 million). Could be setting back up for another put, and we will look for the stock to move up to 600 if no rally tomorrow or perhaps striking near recent highs at 613-614 (the 10 day MVA is 612.62). We will see how things react on the rate cut, looking at puts on a move back down.
BUY POINT: On a move down after a failed test of 600 or 612-614.
POSITION: Lower: April $600 puts to buy (OEY PT). Higher test: April $620 puts to buy (OEY QD).
http://www.investmenthouse.com/cd/$oex.html
(Click to view the chart)
VRTS (Veritas Software--$54.00; -1.13; optionable (VUQ)): Computer Software
http://biz.yahoo.com/p/v/vrts.html
STATUS: Bounced back up slightly, and closed with a tight doji after tapping down to 51 at its low. The low took the stock below its recent lows at 51.88, and the doji is not necessarily indicative of a move up from here. We will see, however, if we get a bounce back up, looking at possible resistance at the 18 day MVA (62.44; 10 day MVA is at 58.42). We will look at a move back down with selling volume that is stronger than what we saw today (down to 15.2 million; average 13.4 million). On a retest and move back down, we will look at a target of 52.
BUY POINT: On a move down after a retest of the 58-62 range, on increased volume in a selling market.
POSITION: May $60 or $65 puts to buy (VIV QL and VIV QM, respectively).
http://www.investmenthouse.com/cd/vrts.html
(Click to view the chart)
MERQ (Mercury Interactive--$39.63; +3.88; optionable (RQB or RBF)):
http://biz.yahoo.com/p/m/merq.html
STATUS: Bounced back up a bit from its doji on its recent low at 35. We will see how the stock handles the 10 day MVA, recent resistance at 42.39; on weakness there, we can see how the market reacts to the rate cut and ride weakness back down. If the stock pushes through, we can watch for a move up to recent highs at 45 and, on weakness, play it back down yet again.
BUY POINT: On a move down from 43-45 range on above average volume (down to 3.37 million today; average 4.15 million).
POSITION: May $55 puts to buy (RQB QK).
http://www.investmenthouse.com/cd/merq.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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