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Begin Part 2 of 2

All prices reflect prices at the close on Monday.

NOTE: Stop losses are plotted at one-quarter to one-half point below pivot points.

Best Plays: Several of the stocks on the report continue to hold patterns or pulled back to support, so they are developing plays (BKLY, ESCM, CHBS, NI, RE). SLOT is looking very interesting. We continue to look at several possible put plays on a downside reaction to the Fed meeting Tuesday.

Best Plays:
1) BKLY: Holding at support in the handle.
2) SLOT: Looks explosive.
3) HSIC: Ready for a breakout on this move.
4) RE: Looking for a move up on the stronger volume.
5) THQI: Looks ready to breakout.
6) Puts: SOX, OEX, DJX, LEH

BREAKOUTS: We are looking for targets on breakout 10-15% above the buy point, adjusted from the usual bull market 15-20%.

New Play (from the weekend:

GADZ (Gadzooks Inc--$23.69; +0.56; optionable (EQK)): Retail: Apparel
http://biz.yahoo.com/p/g/gadz.html
STATUS: Continued higher on the volume momentum established Friday, price hitting a high of 24.25 before it was over for the day (the stock broke out of a v-bottomed base 5 days ago and has flown up). Volume dropped back to 209,700 (avg. 131,318), so we are looking in earnest for that pullback now, as GADZ forms a possible handle to its larger, year-long base (previous high is 23.75). Support on that pullback should emerge at 21.76-22.06. Excellent money flow and buying, and relative strength broke out.
BUY POINT: Pullback: On a move back up after a test of the 21.76 range (buy point).
POSITION: Pullback: Stock and/or June $20 calls to buy (EQK FD, 31 open interests).

Continued Plays:

BKLY has been moved to the Basing/Trading Ranges section.

READY TO BREAK TO A NEW HIGH (or just did):

New Play (from the weekend):

ESCM (Esc Medical Systems Ltd--$21.31; -0.44; optionable (QFC)): Wholesale Medical Equipment http://biz.yahoo.com/p/e/escm.html
STATUS: After blasting up Friday, the stock tested back to its 10 day MVA at its low of 20.50 before pulling back up to close with a doji. Volume pulled back a little bit (535,000; average 311,300) as the stock took a break after last week's 3-day run at its March high of 22.38. The stock can test the 10 day again, but we will continue to look for a move up over the high. 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 continued strong volume. Stop loss: 22.51-22.26.
POSITION: Stock and/or July $20 calls to buy (QFC GD).

Continued Plays:

HI (Household Internat Inc--$59.90; -0.12; optionable (HI)): Credit Services
http://biz.yahoo.com/p/h/hi.html
STATUS: From support of the up trendline (connecting 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 high 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 back up. The 18 day MVA is at 59.45 on a pullback below the 10 day MVA. 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).

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:

STZ (Constellation Brands Inc--$68.09; -0.79; optionable (STZ)): Food & Beverage: Wineries
http://biz.yahoo.com/p/s/stz.html
STATUS: Pulled back in its little consolidation, tapping its 18 day MVA (67.02) at its low of 67.14 but holding to close over its 10 day MVA (68). Volume was higher than we would have liked on a pullback, spiking up to 271,100 (average 135,500). The consolidation is testing its recent breakout from a pennant-type pattern, with its recent breakout high at 70.50. Looking for it to hold the 10 day for a move back up. Excellent money flow, relative strength and buying. Initial profit target: $81-$85.
BUY POINT: Breakout: 70.63, on continued strong volume. Stop loss: 70.13-70.38.
POSITION: Stock and/or July $65 calls to buy (STZ GM low open interest, but plenty at the $70 strike, 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 (from the weekend):

SLOT (Anchor Gaming--$52.38; -0.68; 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. The stock moved in a wide intraday range (50, recent lows, to 54, last week's highs) before settling with a doji. There was a very strong volume spike, coming in at 439,700 (average is 243,600). We will see if the volume signals a move up, looking for a breakout over the pattern high. 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 continued strong volume. 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:

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).

New Play (from the weekend):

CHBS (Christopher & Banks Corp--$30.81; -0.07; no options): Retail: Apparel
http://biz.yahoo.com/p/c/chbs.html
STATUS: In a very short (dating from early February) double-bottom with handle pattern. The stock continued to hold in its recent consolidation range Monday, moving on higher but still below average volume (241,600; average 277,400). CHBS may test the 10 day MVA (30.19) as it did last Wednesday, but we would rather get a move up from here. We will see if it can break out with solid volume behind it. The handle high is 32.38. 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--$29.66; +0.08; optionable (NI)): Utilities
http://biz.yahoo.com/p/n/ni.html
STATUS: Hit 29.95 for the second consecutive session at its high, but again pulled back to close. That level is the new handle high in the stock's 11-week cup base, but volume dropped way off today, coming in below average at 672,700 (average 861,800). The stock has been holding the 10 day MVA (29.28) as support, and after today's loose doji pattern we could get a move back down to that level before we get another run up to attempt a breakout. Money flow and buying are decent, and relative strength is very solid, last week breaking out ahead of price. Still looking for a breakout. 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:

BKLY (W.R. Berkley Corp--$45.75; 0.00; no options): Insurance
http://biz.yahoo.com/p/b/bkly.html
STATUS: Holding at Friday's closing price after dropping to a low of 44.13, below the 18 day MVA (45.24). The recovery back up was on slightly stronger volume (250,500; avg. 347,545), and we like this hold at support. We will look for a move over the 10 day MVA (46.15) for a move back up in this handle for the breakout. The stock was formerly in the breakouts section of the report, but pulled back to form another handle. Initial profit target on a breakout: 54-56.
BUY POINT: 48.88, on volume of 521,000 or better. Stop loss: 48.38-48.63.
POSITION: Stock.

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 (34.76) 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. Initial profit target: 38-40.
BUY POINT: 34.76, on volume of 630,000 or better. Stop loss: 34.26-34.51.
POSITION: Stock and/or July $30 calls to buy (HQE GF).

RE (Everest Re Group Ltd--$63.69; 0.00; optionable (RE)): Insurance
http://biz.yahoo.com/p/r/re.html
STATUS: Is holding along its 18 day MVA (63.57), showing its third consecutive doji. The stock reached down to its 50 day MVA at its low of 62.50, which it did on two occasions last week before recovering. Volume continues to be rather low as the stock moves in this nice-looking handle of its cup base, and we are looking for a strong move up toward the handle high of 67.75. Initial profit target on a breakout: 75-78.
BUY POINT: Breakout: 67.88 on volume of 705,000 (average 467,200; today 253,600) or better. Stop loss: 67.38-67.63. Aggressive: Over 66 on above average volume.
POSITION: Breakout: Stock and/or July $60 calls to buy (RE GL; 12 open interest). Aggressive: Stock and/or July $55 calls to buy (RE GK; 10 open interest).

LOW (Lowe's Companies Inc--$61.25; +1.27; optionable (LOW)): Retail
http://biz.yahoo.com/p/b/bj.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).

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:

IBM (Internat Business Mach--$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 (despite the low volume today) 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).

LEH (Lehman Brothers--$69.28; +3.30; optionable (LES)): Investment broker
http://biz.yahoo.com/p/l/leh.html
STATUS: Moved higher (above the 18 day MVA, 68.45) on lower, average volume (2.8 million). The high tested resistance at the 70 level. On the news of a rate cut of only 50 basis points, we are looking for LEH to turn back down for a drop back down to the March low of 60 (target). Look for the move on strong volume; the 200 day MVA is at 63.87 (watch the 18 day MVA as well, at 68.45).
BUY POINT: On a move back down after a retest of 70, May $85 puts to buy (LES QQ).

Continued Puts:

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).

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 move back down from here, we will look for a drop to 98, or lower (to the October lows in the 95-96 range).
BUY POINT: On a move down from here on strong and rising volume. Safer: Below 98 on stronger volume.
POSITION: May $108 puts to buy (DJV QD).

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).

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).

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).

BOBJ (Business Objects--$30.50; +1.94; optionable (BBQ)): Software
http://biz.yahoo.com/p/b/bobj.html
STATUS: Hit 28.25 at its low Friday on a strong drop, but bounced back up today, showing a loose doji. The stock could give us a fall back from here, or a move up to possible resistance at its prior consolidation range of 31.50-35. Volume on today's move up was predictably weaker, coming in at 1.67 million (average 890,200), but still strong. From here, we are looking at a play to take us down to 21-23. On a bounce, we can watch carefully as the stock moves down toward 28.50.
BUY POINT: Aggressive: Down from here on increased volume. Bounce: A move down on increased selling volume after a test of back up in the 33-35 range.
POSITION: Aggressive: May $30 or $35 puts to buy (BBQ QF or QG). Bounce: May $40 puts to buy (BBQ QH).

MERQ (Mercury Interactive--$39.63; +3.88; optionable (RQB or RBF)):
http://biz.yahoo.com/p/m/merq.html
STATUS: Bounced back up from Friday's doji (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. Initial profit target: 35-36.
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).

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).

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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