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Begin Part 2 of 2
Support and Resistance Levels
Nasdaq: Closed at 1720.36.
Resistance: The 10 day MVA is at 1785.14. The 18 day MVA is at 1859.19.
Support: 1619.58 is the recent low. After that 1500 or 1300.
S&P 500: Closed at 1128.43.
Resistance: 10 day MVA at 1139.20. The 18 day MVA is at 1155.16. The down trendline is at 1160.
Support: Potential soft support at 1100. Then 1085.
Dow: Closed at 9791.09.
Resistance: Breakout is 9992. After that, the down trendline is at 10,185.55.
Support: 9106 is the intraday low. Then it is 8750.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
4-11-01
Export Prices ex-ag., March (8:30): -0.1% versus -0.1% prior.
Import Prices ex-oil, March (8:30): -0.1% versus -0.1% prior.
4-12-01
Initial Claims, 4/7 (8:30): 383K versus 383K prior.
PPI, March (8:30): 0.1% versus 0.1% prior.
Core PPI, March (8:30): 0.1% versus 0.1% prior.
Retail Sales, March (8:30): 0.0% versus -0.2% prior.
Retail Sales ex-auto, March (8:30): 0.2% versus -0.3% prior.
4-13-01
Business Inventories, February (8:30): 0.3% versus 0.4% prior.
Michigan Sentiment-Preliminary, April (10:00): 91.0 versus 91.5 prior.
SUBSCRIBER QUESTIONS
Q: Can you recommend a broker that allows Call/Put Option Trading in an IRA Rollover account? Ameritrade does not allow them.
A: Most brokerages do not allow you to buy and sell put and call options except in a few circumstances. However, trading options in IRA accounts is legal as long as the risk can be quantified. Thus, you can buy long calls, buy long puts, create spreads, and sell covered calls. It is the broker's choice to allow you to do any of these. Nearly all brokerages allow you to sell calls on your stock holdings, i.e., establishing covered call positions. That is where most draw the line. We know that Benjamin & Jerold allow you to do all of the above. The number is 1-800-446-5112. Tell them that you heard about the from Investment House.
TEAM TRADES
Friday we saw the move back down from resistance, but it was not a powerful move and it was another choppy session. It was a day to look for some put plays and a day we were ready to clean up some positions that might not have been working too well. ADVP was a recent and longer term buy we had, and while we have been happy with the performance, we had locked in about a 6% move on the recent play. The stock was having a hard time breaking over 58.75 where it closed on its big move two weeks ago and where it hit Thursday but was unable to breakout as volume fell back. We decided if it could not breakout over 58.75 on Friday we were going to take some profits and catch it on another move up off of the 10 day MVA. In this market, we felt we would prefer to lock in profit and then catch another move. Plus, we were making the trade in an IRA, so no worry about taxes on small amounts of gain. The stock opened at 58.25, ran down and bounced up to 58.75. It ricocheted off of that level and that was it for us. We had told our broker to slide in a stop loss at 58.25 if it hit 58.75 on the session. It dropped pretty fast and we are not sure if our broker got us out on the first pass or when it went back up through it about 20 minutes later. Either way it worked and the stock sold down to the 10 day MVA, tapping that point on its low. Volume was low so we still really like the play for another move up this week.
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: Are looking at some smaller stocks that are in good patterns (AEN, VIDA, and KMX is an update), and we continue to like RSG in its cup with handle. BJ is beginning to look pretty good again.
Best Plays:
1) MME: A star doji on low volume.
2) AEN: Looks ready for a breakout.
3) VIDA: Testing the breakout.
4) RSG: Getting ready for a move up.
5) BJ: Looking for a bounce.
6) Puts: SEBL, MERQ
A New Play:
MME (Mid-Atlantic Med--$20.70; -0.38; optionable (MME): Health Care
http://biz.yahoo.com/p/m/mme.html
STATUS: Pulled back to a perfect star doji (no change between opening and closing prices) on lower volume (110,900; avg. 228,772) after reaching a closing high of 21.08 the previous day, at the top of a run that completed the right side of a 4-month base. The low tested support at the 10 day MVA (20.34); MME can continue to pull back to that level to form a handle, though the doji is a strong sign of a turn back up. Stocks can break out of cups without forming handles. Initial target on that move:
BUY POINT: 21.23, on volume of 343,000 or better. Stop loss: 20.73-20.98.
POSITION: Stock and/or June $20 calls to buy (MME FD).
http://www.investmenthouse.com/cd/mme.html
Trading play:
AEN (AMC Entertainmt--$6.86; +0.56; no options): Media: Movies
http://biz.yahoo.com/p/a/aen.html
STATUS: Moving up from support (18 day MVA, 6.28) on strong volume of 337,900 (avg. 158,090). The stock is in an ascending wedge that formed in the mid-range of the 15-month base's right side, and on the momentum is ready to break out. Pattern high is 7.15 (intraday high), though we are plotting the buy point one-eighth point above 7.10, upper resistance in the pattern. Initial target: $8. Huge money flow and high relative strength.
BUY POINT: 7.23, on continued strong volume (min. breakout volume is 213,000). Stop loss: 6.73-6.98.
POSITION: Stock.
http://www.investmenthouse.com/cd/aen.html
VIDA (Vidamed Inc--$4.97; -0.08; no options): Health Services
http://biz.yahoo.com/p/v/vida.html
STATUS: In a 13-month base (5.88, previous high) and just broke out of a 2-month handle formation in the upper right side. The stock is now testing that breakout on decreasing volume (still high Friday at 345,000; avg. 214,772). In a flying plateau pattern, the stock showed a tight doji on the lower volume, as the low tested down to support at the 10 day MVA (4.75). The doji suggests a turn back up from here if the stock can get a volume surge. Initial target on a move over April high of 5.25: $6. Huge money flow and good buying.
BUY POINT: Over 5.25 on rising volume. Stop loss: 4.74-4.99.
POSITION: Stock.
http://www.investmenthouse.com/cd/vida.html
Updated:
RSG (Republic Srvs--$18.14; +0.04; optionable (RSG): Materials & Construction
http://biz.yahoo.com/p/r/rsg.html
STATUS: Reported on this stock March 29 when price shot up with volume and a breakout looked imminent. However, it pulled back and retested support at the 18 day MVA (17.98) and the last 2 days inched up that level, showing a Friday doji right on top of the 10 day MVA (18.10). Volume crept higher as well but remains below average (529,600; avg. 821,000); combined with support, the stock looks ready to move on a volume surge. Initial target on a move back over 19.10: $21-22.
BUY POINT: 19.23, on volume of 715,000 or better. Stop loss: 18.73-18.98.
POSITION: Stock and/or June $15 calls to buy (RSG GC).
http://www.investmenthouse.com/cd/rsg.html
KMX (Circuit City/Carmax--$7.70; 0.00; no options): Auto Dealership
http://biz.yahoo.com/p/k/kmx.html
STATUS: Another flying plateau that looks very good above support of the 10 day MVA (7.39). The pattern is a test of the stock's recent strong breakout, when it hit a high of 8.52 (March). Volume dropped off steadily in the test, climbing slightly Friday to 96,300 (avg. 123,000). The low again tested just above the 10 day, as it did three times over the last 6 days, and with the current hold at 7.70 (for the third day) looks ready to make a break higher. The stronger volume hints at a pullback, however, but we look for the 10 day MVA to provide support in that event. Initial target on a move back over 8: $9. Big money flow and good buying.
BUY POINT: 8.13, on volume of 130,000 or better. Stop loss: 7.63-7.88.
POSITION: Stock.
http://www.investmenthouse.com/cd/kmx.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
A trading play:
ESRX (Express Scripts Inc--$86.99; +2.20; optionable (XTQ): Health
http://biz.yahoo.com/p/e/esrx.html
STATUS: The stock was pummeled down to a March low of 69.69 from a December closing high of 105.44, but resurged in late March, and after retesting the 18 day MVA (82.27) early in the week, moved up on building volume. Using the 50 day MVA as support (84), the stock moved up on stronger, average volume (757,500), hitting a high of 88.24 before pulling back down. On the renewed strength we are looking for the stock to run to at least the down trendline at 93, our initial target. Consider using trailing stops to preserve gains on the move up.
BUY POINT: Aggressive: Up from here on stronger, above average volume.
POSITION: Stock. August $85 calls to buy have 21 open interests (XTQ HQ).
http://www.investmenthouse.com/cd/esrx.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.
BJ (Bj's Wholesale Club Inc--$46.77; -0.56; optionable (BJ)): Retail: Discount Stores
http://biz.yahoo.com/p/b/bj.html
STATUS: We last reported on the stock April 2 as it pulled back from a second attempt to break resistance at the 48 level. The next day saw a test of the 50 day MVA (currently at 44.57) on the low, then in 2 days BJ made it back over the 10 day MVA (46.52). Unable to hit 48 again, the stock is forming a pennant-type pattern as volume slips lower below average (reaching Friday 388,300; avg. 684,363). The pattern is looking good, and we will watch for a breakout over the high of 48.35 (March) on stronger volume. Initial target on that move: $53-56.
BUY POINT: 48.48, on volume of 924,000 or better. Stop loss: 47.98-48.23.
POSITION: Stock and/or June $40 calls to buy (BJ FH).
http://www.investmenthouse.com/cd/bj.html
ANF (Abercrombie & Fitch--$34.79; -0.21; optionable (ANF): Retail
http://biz.yahoo.com/p/a/anf.html
STATUS: Thursdays' breakout move was thwarted by low market volume, dropping for the stock to 1.2 million (avg. 1.5 million). ANF dropped to a low of 34 but moved back up to close in a pretty tight doji. That's bullish, and we can see a move back up from here unless volume shrinks further; that can result in a retest of the low, if not the 10 day MVA (33.44). Money flow remains excellent, buying good, and relative strength out ahead of price. Target on a move back over 35.79: $39-41.
BUY POINT: 35.92, on volume of 2.2 million or more. Stop loss: 35.87-36.12. Remains a buy on the breakout up to 37.72.
POSITION: Stock and/or August $30 calls to buy (ANF HF).
http://www.investmenthouse.com/cd/anf.html
MEMBER PORTFOLIO: BRCM, CHKP, CSCO, EMLX, IDTI, INTC, JDSU, MVSN, NT, PWER, SUNW, VTSS
Either way:
CHKP (Check Point--$47.25; -1.44; optionable (KEQ)): Security Software
http://biz.yahoo.com/p/c/chkp.html
STATUS: CHKP wasn't able to break the 10 day MVA Thursday, and moved back down Friday, selling down early in the morning but climbing back the rest of the day. Volume was higher at 16.5 million (avg. 10.6 million). Showing a star doji near its high (that low was 44.56), the stock looks bullish for a move over the resistance if the market can rally back. On that move, we can look for a trade up to the range of the 18 day MVA (52.71). Otherwise, as volume tapered off throughout the day Friday, CHKP may not be able to muster the strength to break the 10 day MVA, instead turning back down from there. On a turn back down from either, we will look at buying puts if the market begins to sell off in earnest.
BUY POINT: Upside: Over the 10 day MVA (48.52) on continued strong volume. Down: On a move down after testing 48.52, or the 18 day MVA (52.71), in market selling. Target: 40-41.
POSITION: Upside: Stock and/or July $40 calls to buy (KEQ GH). Put: May $60 puts to buy (KEQ QL; 65 open interests).
http://www.investmenthouse.com/cd/chkphtml
No reports on stocks in this portfolio tonight.
PUT PLAYS: Most of the puts covered in the report tonight are at resistance and ready to turn back down if the market continues to sell. 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:
BEAS (Bea Systems Inc--$28.38; +1.25; optionable (BUC): Business Software
http://biz.yahoo.com/p/b/beas.html
STATUS: Tapped near the 18 day MVA (29.68) on the high of 29 as volume dropped back a bit (25.9 million; avg. 14.8 million), still high though. The stock hasn't been able to break resistance at the 18 day MVA for the last two months, and if it cannot here, we will look at puts on a move back down with a target at the April low near 20.
BUY POINT: On a move back down from here or the 18 day MVA in market selling.
BUY POINT: May $35 puts to buy (BUC QG).
EMC (Emc Corp--$30.15; -1.60; optionable (EMC): Computers: Data Storage
http://biz.yahoo.com/p/e/emc.html
STATUS: The 10 day MVA is at 30.55, and the stock closed just under that level as volume dropped back below average (18.1 million; avg. 19.5 million). EMC can try a move back up to the 18 day MVA (32.70); we will look for a turn back down from that resistance, which held the stock back since early February. The stock can turn back down from here, too, for a drop to the April low at 25.05.
BUY POINT: On a move back down from here or the 18 day MVA (32.70) on selling.
POSITION: May $40 puts to buy (EMC QH).
Continued Puts:
LEH (Lehman--$60.00; -2.42; optionable (LEH)): Brokerage
http://biz.yahoo.com/p/l/leh.html
STATUS: Pulled back after gapping back below the 10 day MVA (61.76) on the opening Thursday. Volume was lower as the stock held at support (3.4 million; avg. 2.8 million). If LEH breaks below 59 on stronger volume, we will look for a move down to 54, the April low.
BUY POINT: On a move below 59, or on a move down after a possible retest of the 10 day MVA, on strong volume.
POSITION: May $70 puts to buy (LEH QN).
VRTS (Veritas Software--$44.82; -2.34; optionable (VIV)): Application Software
http://biz.yahoo.com/p/v/vrts.html
STATUS: After popping over the 10 day MVA (46.38) Thursday, the stock pulled back below that level, showing a doji on lower volume (14.8 million; avg. 14.2 million). The move suggests a turn back up, but if VRTS cannot break the 10 day MVA again, we will look for a move down to the April low of 38.60 on renewed selling. On a break back over, VRTS can retest the 18 day MVA (50.56), but it hasn't been able to take out that resistance for over 2 months. Target: 39
BUY POINT: On a move back down from here or the 18 day MVA (50.56) in market selling.
POSITION: May $55 puts to buy (VIV QK).
VRSN (Verisign Inc--$33.38; -0.68; optionable (QVR)): Internet Software
http://biz.yahoo.com/p/v/vrsn.html
STATUS: Closed just under the 10 day MVA (33.44) as volume dropped lower and below average (7 million). The dojis on lower volume (the stock formed another Thursday) suggest a move back up; if the stock does not break back over the 10 day MVA or resistance at the 18 day MVA (35.49), look for a turn back down, and in market selling we will consider buying puts. Target: 25.38, the April low.
BUY POINT: On a move down after a test the 10 day MVA (33.44), or of the 18 day MVA (35.49), on strong volume in market selling.
POSITION: May $45 puts to buy (QVR QI; 0 open interest).
MERQ (Mercury Interactive--$38.06; -0.88; optionable):
http://biz.yahoo.com/p/m/merq.html
STATUS: Made a pretty strong move Thursday, but closed up against the resistance of its 10 day MVA (39.13). Friday saw MERQ gap down a bit to open, hitting 35.25 at its low, but managed to push back up again to close near the 10 day. Volume was lower (5.69 million; average 4.7 million), and that coupled with the doji pattern reveals weakness. We will continue to monitor MERQ, seeing if it will fall back hard from here or if the stock will test the 18 day MVA (41.79) first. The target is the recent low at 30.75.
BUY POINT: A move back down on strong selling volume with a weak market, after the current move stalls here or after an attempt at the 18 day MVA.
POSITION: From here May $50 puts to buy (RQB QJ). From the 18 day May $55 puts to buy (RQB QK).
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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