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yahoo stock, us stock market
Begin Part 2 of 2
SUBSCRIBER QUESTIONS
Q: What does the Arms Index tell us?
A: The Arms Index was invented in 1962 by Dick Arms. It has tracked market data since the late 1960's. Without going into great detail, the Arms index is simply another measure of fear, selling, and capitulation in the stock market. It uses relationships in the advance/decline line and other indicators. A reading above 1.50 is considered to be a signal of a significant bottom that will occur between 4 and 20 days following the signal. That signal was given Tuesday. It has accurately called bottoms in 1970, 1974, 1980, 1982, 1987, 1997, and . . . 2001? There is not data of the type necessary to back test the index earlier than the 1960's, so we don't know how it would have performed in the Great Depression. But, as we have said before, we are not in the Great Depression right now. Do we trust it? Well, we hope it is right, but we don't see all the indications of a turn we would like to see such as great patterns in great stocks. Still, a bottom means a bottom and not a massive rally. After the bottom there is some building that goes on to complete bases. Further, there could be more selling before the time period is up. All the more reason to keep an eye on price/volume action.
TEAM TRADES
QQQ: The Nasdaq showed us a nice double top today right before lunch, and as that coincided with Greenspan finishing his talk, it looked as if the selling might get carried away again. We were not convinced, so we waited perhaps longer than we should have, i.e., until it took out 35 where it bounce earlier in the session. That turned out just fine, however. The May 45 puts were trading 9.7 by 9.9. We looked at splitting the spread, but when that did not work right off we adjusted to 9.9 to take care of that problem. As the index continued to fall, we knew we had to leave to take care of some other business, so we entered an order to sell at 10.9 to give us a nice, round number on the trade. As it turned out, the QQQ jumped up, but then sold back down taking out the order on the way. We had thought about keeping the order open overnight, but the selling was getting long in the tooth and we did not want to overstay put positions.
For a review of frequently asked questions, please use the link below:
http://www.investmenthouse.com/1questions.htm
THE PLAYS:
Reading 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. Please click on the Yahoo and chart links for company and charting information.
Best Plays: Several recent plays look ready to deliver (WGR, APPB, ALLY, NDE). If we get an opening gap up on a buying burst, look for a test of that opening price, or today's closing price, before the stocks head back up.
Best Plays:
1) MDC: Ready to head higher.
2) WGR: Making a breakout move.
3) APPB: Breaking out and still a buy.
4) ALLY: Tested, and ready to move up.
5) Puts: STI, LEH
A New Play:
MDC (MDC Hldgs--$38.70; +0.98; no options): Materials and construction
http://biz.yahoo.com/p/m/mdc.html
STATUS: Looks ready to move back up from support after pulling back from a breakout run out of double bottom pattern. The low tested the 10 day MVA (37.77) then the stock climbed on a shot of higher volume (191,000; avg. 133,136). Looking for a move up from here for a breakout over the recent high at 40.75. Previous basing high is 41.45. The stock shows great money flow and buying, and relative strength has moved out ahead of price, which is a bullish indicator. Target on the move over 41: $45-47.
BUY POINT: 41, on continued strong volume. Stop loss: 40.50-40.75. On a gap higher at the open, look for an initial test of that price or today's closing price before the stock heads up.
POSITION: Stock.
http://www.investmenthouse.com/cd/mdc.html
Updated:
WGR (Western Gas Resources--$32.97; +1.98; optionable (WGR)): Oil & Gas Pipelines
http://biz.yahoo.com/p/w/wgr.html
STATUS: Making a breakout move from the cup with handle (handle high is 34.45) on a leap from the 18 day MVA (31.13). Volume broke above average (223,300; avg. 213,090), so we're looking for stronger numbers there to support the breakout. Money flow is huge, buying good, and relative strength has broken out ahead of price, a bullish sign. Target on the breakout:
BUY POINT: 34.58, on volume of 320,000 or better. Stop loss: 34.08-34.33. Remains a buy on the breakout up to 36.31. Watch for an initial test, if the stock gaps higher, of the opening price, or today's closing price.
POSITION: Stock and/or July $30 calls to buy (WGR GF).
http://www.investmenthouse.com/cd/wgr.html
APPB (Applebee's--$37.94; +1.88; optionable (AQB)): Restaurants
http://biz.yahoo.com/p/a/appb.html
STATUS: Broke out of the lateral consolidation (flying plateau that was a test of the recent breakout) on stronger volume (1 million; avg.310,454). The stock remains a buy on this move, still within 5% of the breakout point. A strong move, backed by great money flow and good buying. Relative strength broke out. Target: $40-42.
BUY POINT: Remains a buy up to 38.40 on this move. Stop loss: 37.90-38.15.
POSITION: Stock and/or August $35 calls to buy (AQB HG).
http://www.investmenthouse.com/cd/appb.html
ALLY (Alliance Gaming--$18.44; 0.00; no options): Leisure
http://biz.yahoo.com/p/a/ally.html
STATUS: Testing the breakout from the ascending wedge (took the stock up to a March high of 20.05), the stock tested back to the 10 day MVA (17.37), tapped on the low the last 2 days. The stock looks ready to move back up from here, moving back over the opening price of 18.13 as volume dropped back to average (152,200; avg. 146,000). On a morning gap up, look for a test of that gap price, or of today's closing price, before the stock heads up. Looking for the break to a new high for possible positions with stock. Outstanding money flow and buying, and relative strength is out ahead of price. Target: $22-23.
BUY POINT: Over 20.05, on rising volume in the range of 205,000. Stop loss: 19.55-19.80.
POSITION: Stock.
http://www.investmenthouse.com/cd/ally.html
NDE (Indymac Bancorp--$27.94; -0.37; optionable (NDE): Savings and loan
http://biz.yahoo.com/p/n/nde.html
STATUS: Tested back to the 18 day MVA on the low of 27.40 for the second day, as volume pulls back further in the handle to the 3-month cup base (290,300; avg. 429,500). It has been an orderly pullback, the type we like in handle consolidations, and look for a move back up from today's loose doji, or after a retest of the 18 day MVA (the stock closed just under the 10 day MVA at 27.96). The pattern looks good, and we may see a quick turn back up from here for a move to the handle high (30) and breakout. Huge money flow and good buying. Initial target on a breakout: $33-35.
BUY POINT: 30.13, on volume of 644,000 or better. Stop loss: 29.63-29.88. A buy on the breakout up to 31.64.
POSITION: Stock and/or July $30 calls to buy (NDE GF; delta .444). July $25 calls (NDE GE; delta .775) have 86 open interests.
http://www.investmenthouse.com/cd/nde.html
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: 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 CPN as the new leaders, as they are holding up well. 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 (Shaw Grp--$48.20; +2.82; optionable (SGR)): Manufacturing
http://biz.yahoo.com/p/s/sgr.html
STATUS: Notable that the stock broke back over the 50 day MVA (47.54) on stronger, average volume (549,700), after selling down below that level over 2 weeks ago. Support held at the 45 level, and the stronger volume boosted price up from that footing (opening price was 45.40). The stock has overhead supply to handle up to 55, and we will look at that target after the stock moves over 51, which will take SGR over the first level of resistance. Relative strength is out ahead of price, a bullish sign, and money flow is trying to pull back up.
BUY POINT: Aggressive: Over 51 on volume in the range of 742,000 or better. Stop loss: 50.50-50-75. New high: Over 55, on similar strong volume. Stop loss: 54.50-54.75.
POSITION: Both positions: Stock and/or July $50 calls to buy (SGR GJ).
http://www.investmenthouse.com/cd/sgr.html
UP & COMERS PORTFOLIOS: We have added some new stocks to this portfolio: LNCR, BJ, ANF, LOW, HI and THQI. We like the patterns and their earnings numbers, and 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.
No reports on stock in this portfolio tonight.
MEMBER PORTFOLIO: BRCM, CHKP, CSCO, EMLX, IDTI, INTC, JDSU, MVSN, NT, PWER, SUNW, VTSS
No reports on stocks in this portfolio tonight.
PUT PLAYS: ADBE, CHKP, EBAY, CIEN, VRTS, have sold off pretty well lately and look ready to recoup back to resistance (10 and 18 day MVAs in most cases) on the PRGN news, so we are watching for moves up to and then back down from resistance for entering with new puts. Some financials look ready to offer more downside from here.
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 Puts:
STI (Suntrust Banks--$60.95; -2.17; optionable (STI):
http://biz.yahoo.com/p/s/sti.html
STATUS: Could not hold its move back over the 50 day MVA (63.37), dropping back today. We will see if the stock tests January-March lows at 62, or even the 50 day again, but on a drop back on increased selling volume, a possible put play. The recent low is 57.29, with the 200 day MVA at 54.79. On strong selling we will target the 200 day.
BUY POINT: A move down on rising volume after a drop back from a failed test of 62.
POSITION: May $65 puts to buy (STI QM; 0 open interests).
LEH (Lehman Bro--$55.35; -3.16; optionable (LEH)): Brokerage
http://biz.yahoo.com/p/l/leh.html
STATUS: Sold down from the 10 day MVA (62.10) the last two days on strong volume (reaching 5 million Wednesday; avg. 2.8 million). If the stock takes out the low of 54, it can fall to 50 for an initial target, or the November low at 47 for possible put positions.
BUY POINT: Below 54 on continued strong volume, May $65 puts to buy (LEH QM, 88 open interests with delta of .758) or May $60 puts to buy (LEH QL, delta .595).
BBT (Bb & T--$34.25; -0.74): Banking.
http://biz.yahoo.com/p/b/bbt.html
STATUS: Failed at the 50 day MVA (35.18) after a decent run up from the March low of 30.24, breaking below that support level Tuesday, gapping down and continuing the drop today. Volume increased (1.04 million; average 976,272), but the stock has some support from mid-March levels here. On a continued move back below 33.75 on increased selling volume, a put play down to a target of the 200 day MVA (31.50).
BUY POINT: A drop back below 34 on increased volume in sector weakness.
POSITION: May $40 puts to buy (BBT QH; 0 open interests).
PNC (Pnc Financial--$64.98; -2.07): Banking
http://biz.yahoo.com/p/p/pnc.html
STATUS: Did not hold up from its recent great run from the March low of 56, and after dropping back through the 50 day MVA (67.47) Tuesday, dropped harder today on stronger volume (1.45 million; average 1.2 million). We will see how the stock handles the 200 day MVA, below at 63.52, and on a continued run through that support, will look at a put play down to recent lows at 64.
BUY POINT: On the break below the 200 day MVA (63.52), May $70 or $75 puts to buy (PNC QN or QO).
MMM (Minnesota Mining--$98.62; -1.29; optionable (MMM): Conglomerates
http://biz.yahoo.com/p/m/mmm.html
STATUS: The stock broke below the 200 day MVA (99.62) on strong volume (4 million; avg. 2.9 million). Up from a low of 97.16, the stock can move up to test the resistance again, and we can look for a move back down from there. Otherwise, the loose doji signals a possible move back over the moving average, for a retest of the 10 day MVA (102.58). On a turn back down from that level in market selling, we can look at puts from there as well.
BUY POINT: On a move back down after a test of the 99.62 range or the 102 range, May $110 or $105 puts to buy (MMM QB or QA).
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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yahoo stock
us stock market
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