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us stock market, trend trading stock
Begin Part 2 of 3
SUBSCRIBER QUESTIONS
Q: When you give entry points (price/volume) for trades, which do you weigh more -- price or volume? For example, [at 2:07] one of the plays was at the buy point ($8.85), but projected volume would only be approx. 216K shares (target volume is 270K). The projected is based on the volume as of 1pm EST of 108K. Do both have to fall in line, or above? Or, under what circumstances (up market, etc.) would you enter a trade where BOTH targets (specifically volume) are not satisfied? Thanks for the great commentary/analysis.
A: A good question in the mechanics of when to enter. It so happens that we were watching the stock because it had made a good price move and volume as you noted was looking solid. The reason we had not entered before that time was the price action. The stock had hit higher mid-day but had pulled back to test the move. Now volume was not exactly on target, but it was going to be in the ballpark. That is good enough as volume is not an exact science; you want to see a good, strong volume push thru the buy point. Thus we were looking for the stock to start another move up out of the early afternoon pullback and lateral move. When we saw that occur that was enough to enter positions. As it turned out volume was solid as volume acclerated in the last hour.
We always prefer to see both parts of the equation falling into line. In this market and particularly with upside positions, we want to see the move show it has some staying power. What looks good early can look like roadkill by the close. You may have noted that we are much more active in the last hour than the entire prior session given the market's intraday and day-to-day volatility. This gives us a much better picture of the real strength behind any move. Some stocks can run away from us, but in this market it is very risky to jump on a stock rallying sharply early but on light volume. As seen with many stocks, you get an early run that backs off intraday. If it it going to hold, it will rally again later. That sets us up in a good position for a further follow through on that move that gets the breakout underway.
There are times we will take early positions when the price is hit but volume is lagging. If the market is showing a good trend (an established trend of more than a day or two) in the same direction of the position we are taking and the stock is breaking from a soild pattern we will take some partial positions on that move. If it turns out to be a solid move we can add toward the end of the session on a pullback or even a session or more later when it successfully tests the move (pulls back to test support and then starts back up on rising volume). This illustrates the point that tends to get lost in entering positions: there is never just one entry point. Good stocks in good trends will give you several opportunities to make that first buy and then subsequent buys when you add to a strong stock. We love to add to winners. That is much easier than going out and finding another stock to do the same, and it is easier to manage. Jack Bogle would cringe to hear this concept of focusing your money as opposed to spreading it out over many stocks. If you have a winner and it continues to perform, why not ride that horse as far as it will take you?
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THE PLAYS
In each report we prepare full write-ups for those that look ready to move. If the move has been made already we discuss the play in the summary table. The purpose is to focus on the next good movers.
Good moves: ELAB; APOL; CECO; COH; MVL
NEW PLAYS:
Upside:
Play Date: 03/08/2003
NDC (NDC Health--$22.03; +0.54; optionable): Management services
http://biz.yahoo.com/p/n/ndc.html
STATUS: Saucer. NDC has been working its way out of a deep downtrend (as has much of the market). It is making that series of steps higher off the lows, rallying, moving laterally to consolidate the gains, and then rallying again. Right now it is working through a 7-week saucer that has used the 50 day MVA (20.75) as support. Accumulation is solid since January at 4 up weeks on rising volume to 0 down weeks on rising volume. Friday NDC rallied toward a breakout on a sharp jump in volume to average levels. Looks ready to make a solid move.
Volume: 245.6K Avg Volume: 240.517K
BUY POINT: $22.22 Volume=300K Target=$25 (initial; this is the gap down point) Stop=$20.66
POSITION: NDC HD - Aug. $20c (70 delta, low OI) &/or Stock
http://www.investmenthouse.com/cs/ndc.html
Play Date: 03/08/2003
$OEX (S&P 100 options--$0; 0; optionable): SP100
http://biz.yahoo.com/p/$/$oex.html
STATUS: Double bottom. As outlined in the market summary, the large caps have reached down twice intraday to support at 410 and rallied back sharply, setting up the potential double bottom. We are looking to capture any surge that we get on a war or other impetus to ride the move up to the 50 day MVA. That is our initial target.
BUY POINT: $421.05 Volume=0 Target=$438 Stop=$416
POSITION: OXB DD - April $420c (53 delta)
http://www.investmenthouse.com/cs/$oex.html
New Pre-Split:
Play Date: 03/08/2003
ANPI (Angiotech Pharmaceutical--$40.2; +1.81; optionable): Drug manufacturer
http://biz.yahoo.com/p/a/anpi.html
STATUS: Breakout. In a defensive market drug and medical stocks are considered safe havens, and we have seen these stocks form up and start good moves. ANPI had been in a serious downtrend for a year, but in late February it broke that downtrend, tested that break in early March with a move down to the 18 day MVA (37.90), and then blasting higher Friday on a big volume surge. We really like to see successful breakout tests as they show the stock has plenty of support to survive some selling on post-breakout profit taking as well as drive it back up. Solid move and we are looking to get on board.
Volume: 291.226K Avg Volume: 103.736K
BUY POINT: $40.33 Volume=156K Target=$45.85 Stop=$37.96
POSITION: AUJ FH - April $40c (55 delta) &/or Stock
http://www.investmenthouse.com/cs/anpi.html
New Post-Split:
Play Date: 03/08/2003
SRCL (Stericycle--$35.67; -0.51; optionable): Waste management
http://biz.yahoo.com/p/s/srcl.html
STATUS: Ascending triangle. SRCL is massing at the breakout point of its 4.5 month base, crowding at 36 as volume swelled the latter part of last week. Accumulation is solid at 5 up weeks on rising volume to 2 down weeks on rising volume as SRCL works toward resolution of the triangle. These triangles are bullish as the stock makes higher lows (investors buy on dips earlier and earlier) while it crowds the same top. It is basically building pressure from below to pop higher. These can be strong moves so we are going to get ready to jump on board.
Volume: 505.43K Avg Volume: 419.06K
BUY POINT: $36.55 Volume=629K Target=$41 Stop=$34.45
POSITION: URL EG - May $35c (59 delta) &/or Stock
http://www.investmenthouse.com/cs/srcl.html
CONTINUING LEADER PLAYS
Upside:
Play Date: 02/13/2003
AVCT (Avocent--$27.25; -0.11; optionable): Computer peripherals
http://biz.yahoo.com/p/a/avct.html
STATUS: Testing the 18 day MVA. AVCT is showing a very nice, orderly test of the 18 day MVA (27.22). It sports solid accumulation and money flow. Friday it showed a hammer doji or a doji 'with a tail', i.e., where it reaches lower and then rallies back to close. In short the sellers were winning the day but the buyers came back in to drive it back to where it opened. Volume rose on the session as well, a good sign when a stock in a good pattern tests lower and rallies back. AVCT looks ready to continue the move from here.
Volume: 556.303K Avg Volume: 530.181K
BUY POINT: Aggressive: 27.65 (just over the 10 day MVA); Breakout: $28.45 Volume=725K Target=$31.15 Stop=$26.46
POSITION: QVX HE - Aug. $25c (63 delta) and/or Stock
http://www.investmenthouse.com/cs/avct.html
Play Date: 02/04/2003
CGNX (Cognex--$22.72; +0.01; optionable): Scientific & technical instruments
http://biz.yahoo.com/p/c/cgnx.html
STATUS: Ascending triangle. Looking so ready to make the breakout as CGNX jumped up Thursday on strong volume and was again banging at the door Friday on continued strong volume. Money flow is shooting up ahead of the stock price; the pressure had built up and it looks ready.
Volume: 699.506K Avg Volume: 391.206K
BUY POINT: $23.09 Volume=525K Target=$26.88 Stop=$21.47
POSITION: QCG ED - May $20c (65 delta, low OI) and/or Stock
http://www.investmenthouse.com/cs/cgnx.html
Play Date: 03/06/2003
ELAB (Eon Labs--$23.87; +0.67; no options): Drug manufacturers
http://biz.yahoo.com/p/e/elab.html
STATUS: Reverse head and shoulders. Looking strong, rising the past two sessions on a very nice surge in above average volume. The move has put ELAB on the brink of the breakout. Relative strength is already breaking out and money flow is starting a strong move higher. This goes hand in glove with the solid accumulation at 4 up weeks on rising volume to 1 down week on rising volume. A new issue back in May, ELAB looks ready for an all-time high.
Volume: 362.498K Avg Volume: 194.34K
BUY POINT: $24.06 Volume=325K Target=$28.88 Stop=$22.38
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/elab.html
Play Date: 02/27/2003
ICST (Integrated Circuit System--$23.19; +0.14; optionable): Semiconductor integrated circuit
http://biz.yahoo.com/p/i/icst.html
STATUS: Cup w/handle. ICST looks to be starting the move up in the handle after gapping down to the 18 day MVA on the Friday low and then rebounding well to close positive and with a fractional gain. It has one of the best patterns in the chip sector (integrated circuits are outperforming), and it did a good job of overcoming the Intel news. Accumulation is solid at 4 up weeks on rising volume to 2 down weeks on rising volume. Just sitting back and watching for that high volume breakout.
Volume: 1.401M Avg Volume: 1.625M
BUY POINT: New: $24.05 (orig. $23.31) Volume=2M Target=$27 Stop=$21.68
POSITION: IUY GX - July $22.50c (60 delta, low OI) &/or Stock
http://www.investmenthouse.com/cs/icst.html
Play Date: 02/22/2003
LGTO (Legato Systems--$5.98; +0.01; optionable): Application software
http://biz.yahoo.com/p/l/lgto.html
STATUS: Ascending triangle. Still working laterally, spending the entire week testing toward the 50 day MVA (5.65) on the intraday lows and rallying back to hold the 18 day MVA (5.94). It has shown great resilience in the move as the market sells, and we continue to wait for the breakout on volume.
Volume: 1.145M Avg Volume: 1.576M
BUY POINT: $6.42 Volume=2M Target=$8.25 Stop=$5.88
POSITION: EQN IR - Sept. $5c (76 delta, low OI) or EQN FR - June $5c (78 delta) &/or Stock
http://www.investmenthouse.com/cs/lgto.html
Play Date: 02/26/2003
SBL (Symbol Technologies--$10.55; +0.3; optionable): Computer peripherals
http://biz.yahoo.com/p/s/sbl.html
STATUS: Testing the breakout. After the Thursday hammer doji on the 18 day MVA Thursday, SBL started higher Friday on some rising though still below average volume. It looks as if it is ready to make the move, but it needs to give us more volume to take new or additional positions. A good test of the 3-month double bottom showing solid accumulation at 3 up weeks on rising volume to 1 down week on rising volume.
Volume: 1.133M Avg Volume: 1.435M
BUY POINT: New: $10.72 (orig. $10.45) Volume=2M Target=$12.25 Stop=$9.72
POSITION: SBL GB - July $10c (59 delta, low OI) and/or Stock
http://www.investmenthouse.com/cs/sbl.html
Play Date: 01/04/2003
STN (Station Casinos--$19.4; +1.56; optionable): Resorts & casinos
http://biz.yahoo.com/p/s/stn.html
STATUS: Breakout. After forming a reverse head and shoulders May to November that could not yield a breakout (as the market peaked at that point), STN then started a 4-month flat base ranging from 17 to 19. Last week when it started the roll back down it stopped at the 18 day MVA at 18, never making it back to the bottom of the range at 17. It launched from there Friday on massive volume. We had been watching STN still and it was on our play list again for this week when it made the move. We fired off an alert on it, and here it is today. It is showing positive accumulation and it definitely has a great foundation for this move with that base on base pattern it used to launch this move.
Volume: 1.59M Avg Volume: 373.692K
BUY POINT: $19.05 Volume=600K Target=$22.86 Stop=$17.72
POSITION: STN GW - July $17.50c (72 delta) and/or Stock
http://www.investmenthouse.com/cs/stn.html
Play Date: 02/22/2003
WFR (Memc Electronic--$9; 0; no options): Semiconductor, integrated circuits
http://biz.yahoo.com/p/w/wfr.html
STATUS: Flat/Cup w/handle. WFR is in the chip sub-sector showing very solid patterns, and it is currently working in a 3-month flat trading range that is acting as the handle to a 7.5 month cup that started last April. After approaching the breakout point over 9 early in the week, WFR fell back to test the 18 day MVA on the Thursday and Friday low (8.75), rebounding on solid, above average volume. It did very well overcoming the INTC disappointment, holding its pattern without any trouble. It remains poised to make the breakout move.
Volume: 158.8K Avg Volume: 148.994K
BUY POINT: $9.35 Volume=217K Target=$11.25 Stop=$8.59
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/wfr.html
PRE-ANNOUNCEMENT PLAYS
New:
Play Date: 03/08/2003
EBAY (Ebay--$79.9; +1.04; optionable): Internet auctions, sales. Forecast to announce a split April 22 after the market close in conjunction with earnings.
BACKGROUND: EBAY announced a 3:1 stock split 1-26-99 and then a 2:1 stock split in April 2000 at a stock price of $140.
http://biz.yahoo.com/p/e/ebay.html
STATUS: New high breakout. EBAY has continued to defy the market, rallying up the short term MVA in late February and this month after a mid-February test of the 50 day MVA (74.26). Friday it rallied sharply on its best volume in 7 weeks. We are looking to get in on this move with a partial position on a further move through 80. We will be patient and then look for the next entry point as it comes back to test this first move.
Volume: 6M Avg Volume: 5.608M
BUY POINT: $80.08 Volume=8M Target=$92 Stop=$77.04
POSITION: QXB GP - July $80c (54 delta) &/or Stock
http://www.investmenthouse.com/cs/ebay.html
Continued:
Play Date: 02/15/2003
CECO (Career Education--$47.71; +0.78; optionable): Education and training. Forecast to announce a split on 4-8-03 in conjunction with earnings. The company has not confirmed this date, but based upon our research this is the date for the announcement.
BACKGROUND: Last announced a 2 for 1 split on 4-31-01 in conjunction with earnings. The stock price was $61. The annual shareholder meeting was on 5-11-02 at which time authorized shares were increased. The company has sufficient shares for a 2 for 1 split.
http://biz.yahoo.com/p/c/ceco.html
STATUS: Cup w/handle. The later part of last week CECO started to show life in the handle, testing the 18 day MVA on the Friday low (46.06) and rallying for a nice gain on rising, above average volume. This is part of an overall volume swell last week as CECO suddenly became active. Reminds you of dormant volcanoes suddenly starting to rumble; there are signs that tell of an eruption. CECO is showing signs it is getting ready to erupt.
Volume: 849.934K Avg Volume: 807.389K
BUY POINT: $48.07 Volume=1.4M Target=$54 Stop=$45.74
POSITION: CUY TI - July $45c (58 delta, low OI) and/or Stock
http://www.investmenthouse.com/cs/ceco.html
Play Date: 02/20/2003
FCN (FTI Consulting--$44; +0.34; optionable): Management services. Looking for a split announcement in early May.
BACKGROUND: Last split 2:1 on 1-17-2002.
http://biz.yahoo.com/p/f/fcn.html
STATUS: Ascending triangle. After a strong move on volume 9 sessions back, FCN was stalled somewhat with the market selling. Instead of rolling over, however, FCN moved laterally, holding over the 10 day MVA (43.30). As it moves laterally it is showing very good price/volume action, i.e., volume jumping on up days and falling back on down days. Friday saw one of those up days and it looks as if FCN is going to try another strong move that breaks higher for us. Strong 6 to 0 accumulation.
Volume: 221.8K Avg Volume: 253.932K
BUY POINT: $44.05 (orig. $42.96) Volume=400K Target=$48.38 Stop=$40.15
POSITION: FCN FH - June $40c (66 delta, low OI) &/or Stock
http://www.investmenthouse.com/cs/fcn.html
Play Date: 03/01/2003
HAR (Harman Intl.--$57.7; -2.85; optionable): Consumer electronic equipment. Working into this one early as we do not expect a split announcement until the summer, but we are hearing something about a possible earlier announcement.
BACKGROUND: Last announced a 2:1 stock split on August 16, 2000 when the stock price was $64. It ran like a wild animal on that announcement.
http://biz.yahoo.com/p/h/har.html
STATUS: Saucer. HAR was unable to capitalize on the breakout attempt in late February, and now it has breached the 50 day MVA on a huge volume surge. Going to let it settle out and form up again and then we will come back to it.
Volume: 886.5K Avg Volume: 319.791K
BUY POINT: No positions for now.
http://www.investmenthouse.com/cs/har.html
Play Date: 02/25/2003
TTC (Toro--$68.03; -0.37; optionable): Motorized farm and home tools. Just announced earnings and looking trying to pinpoint a date. Announcements sometimes come after successful earnings reports, and TTC had a good one.
http://biz.yahoo.com/p/t/ttc.html
STATUS: Testing the breakout. A strong move Wednesday on strong volume, but TTC could not extend the move the last two sessions. It fell back, but managed to hold the 10 day MVA (68.18) on lower, below average volume and showing a doji as it did. Still looks very strong after a strong earnings announcement. Solid 5 to 1 accumulation in this current 15-week base with continued strong money flow.
Volume: 53.7K Avg Volume: 96.376K
BUY POINT: $68.85 Volume=137K Target=$76.55 Stop=$65.35
POSITION: TTC FM - June $65c (72 delta, low OI) &/or Stock
http://www.investmenthouse.com/cs/ttc.html
End Part 2 of 3
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