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Begin Part 2 of 2
TEAM TRADES
VFC: Sometimes they are not all that sexy, but a good breakout from a solid pattern still gets us excited. This clothing/textile manufacturer showed a volume spike six sessions ago and then started a move up Thursday. It showed excellent volume Friday and broke out today on huge volume. Today it gapped over the breakout price (37.06) and ran to 38. The eSignal alarm went off at the open on some impressive volume, so it was just a matter of deciding if we wanted to wait for a pullback of not. After 10 minutes of trading (it opened 10 minutes late with buy imbalances) it pulled back to 37.70. It started right back up, so we put a buy stop at 38.06 to let the stock take out the morning high. Well, trading was pretty fast, and it looked as if the stock had jumped over us somehow; as it turned out it came back to test the move over 38 (this happens a lot on breaks over the morning high) and from what we could tell that is when the fill came. The stock rallied to 38.70, but then suffered some profit taking in the afternoon before posting a healthy rally to a new high. Lots of volume on this move, so we are looking for more, but we have to also realize that stocks in this market run up and get sold back. Our first target is 15% at 42.50.
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: Stocks on the weekend report continued to hold up in patterns (MME, AEN, RSG, KMX, and VIDA moved up on better volume). MGL is holding its handle. We are excited about the continued improvement in the New Leader and Up & Comers portfolio stocks. As usual, we are looking at some new and updated stocks that have good patterns, and have updated puts.
Best Plays:
1) KNGT: Making a move up on stronger volume.
2) FLM: A breakout move.
3) DRI: Ditto.
4) DORL: About to break out of its reverse head and shoulders.
5) RCGI: Looks interesting in its flat consolidation.
6) ACS: Above the down trendline and in a decent pattern.
7) SGR: Making a good move.
8) LLL: Trying to do the same.
New Plays:
KNGT (Knight Transpt--$25.12; +1.06; no options): Trucking
http://biz.yahoo.com/p/k/kngt.html
STATUS: Hit a new all-time closing high on stronger volume after testing support at the 24 level (on the low of 24.01). The stock still needs to top the February high of 25.44, but we like the break of resistance at 25.09 and the stock is looking strong. It is in a reverse head and shoulders pattern and is about to complete the pattern. Money flow and buying look excellent, and relative strength has broken out. Looking for a continued move up from here as volume strengthens (up to 52,200 Monday; avg. 90,000). Initial target on a move over the high: $28-29.
BUY POINT: Over 25.44 on volume in the range of 122,000. Stop loss: 24.94-25.19.
POSITION: Stock.
http://www.investmenthouse.com/cd/kngt.html
FLM (Fleming--$27.12; +2.05; no options): Wholesale foods
http://biz.yahoo.com/p/f/flm.html
STATUS: The company's shares shot up in early February on news of a deal with K-Mart, and after testing that breakout, breaking out again, helped by news of another deal, this time with Eagle Food Centers. After hitting a February high of 26.80, FLM pulled back in the handle to a long base, forming an ascending wedge in the latter portion of the handle. The stock shows great money flow and relative strength that has broken out. Remains a buy on the move. Buy point is 26.93.
BUY POINT: Up to 28.28 on continued rising volume. Stop loss: 27.78-28.03.
POSITION: Stock. July $25 calls to buy (FLM GE) have no open interests.
http://www.investmenthouse.com/cd/flm.html
Updated:
DRI (Darden Rest--$25.24; +1.36; optionable (DRI): Leisure
http://biz.yahoo.com/p/d/dri.html
STATUS: Broke out of the handle to the 4-month cup base, as volume shot to 2.45 million (avg. 797,000). The stock dropped off the high of 26, but remains a buy on the breakout; we will see if the volume momentum can carry the stock back up to continue the move. Target: $28. Great money flow and good buying. Relative strength broke out.
BUY POINT: Remains a buy up to 26.12 on continued strong volume. Stop loss: 24.74-24.99.
POSITION: Stock and/or July $22.50 calls to buy (DRI GX).
http://www.investmenthouse.com/cd/dri.html
DORL (Doral Fincl--$30.00; +0.87; optionable (QDL): REIT
http://biz.yahoo.com/p/d/dorl.html
STATUS: Ready to break out of its reverse head and shoulders pattern. Volume was stronger on the move (up from a low of 28.96 that tested support at the 10 day MVA, 28.60), and we look for a breakout over the pattern high of 30.38. Initial target on the breakout: $34-35.
BUY POINT: 30.51, on volume of 408,000 or better (Monday's volume is 263,700; avg. 302,545.) Stop loss: 30.01-30.26.
POSITION: Stock and/or August $30 calls to buy (QDL HF; 99 open interests).
http://www.investmenthouse.com/cd/dorl.html
RCGI (Renal Care--$27.30; +0.87; optionable (NUQ): Health Services
http://biz.yahoo.com/p/r/rcgi.html
STATUS: We have covered this stock several times as it moves in its flat base (previous high is 28.63), but in the last 3 days volume action has changed character, surging on Thursday as the stock recovered from a drop to the 200 day MVA (23), pulling back with price Friday, then surging back up Monday as the stock moved up from support (10 day MVA, 26.50). We are looking for a breakout over the previous basing high, keeping in mind that the stock can form a handle after making the move up to that potential resistance. Shows outstanding money flow and good buying. Relative strength has broken out ahead of price. Initial target on a breakout: $32-33.
BUY POINT: 28.76, on continued rising, strong volume. Stop loss: 28.26-28.51.
POSITION: Stock and/or June $25 calls to buy (NUQ FE).
http://www.investmenthouse.com/cd/rcgi.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, but are making a solid comeback (ACS, LLL, NATI, ESRX). 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
ACS (Affiliated Computer--$65.58; +0.96; optionable (ACS): Software
http://biz.yahoo.com/p/a/acs.html
STATUS: The stock is in a double-bottom pattern, though it isn't a classic type, where the right dip undercuts the first. After gapping up Thursday, the stock is moving laterally on quite low volume (302,400; avg. 519,409), making a slight move up Monday as volume did the same. The stock is holding above the down trendline (connecting February and March highs), and looks ready to move up on a surge in volume. Target on a move over the February high of 68.59: $76-79.
BUY POINT: Over 68.59 on volume of 408,000 or better. Stop loss: 68.09-68.34.
POSITION: Stock and/or July $60 calls to buy (ACS GL).
http://www.investmenthouse.com/cd/acs.html
SGR (Shaw Grp--$53.60; +3.45; optionable (SGR): Manufacturing
http://biz.yahoo.com/p/s/sgr.html
STATUS: Took a day of rest after Wednesday and Thursday's decent run up (that broke the stock over its moving averages), then powered back up Monday as volume rose higher above average to 650,800; avg. 526,045). The stock beat our initial target at the 52 resistance to reward aggressive players, and looks ready to take out the February high of 55.39, our second target. Utilize stop losses or trailing stops if desired. Looking good, with steadily improving money flow and relative strength that has broken out. Target on a move over 55.39: $61-63.
BUY POINT: Over 55.39 on continued rising volume (in range of 875,000). Stop loss:
54.89-55.14.
POSITION: Stock and/or July $50 calls to buy (SGR GJ).
http://www.investmenthouse.com/cd/sgr.html
LLL (L-3 Communctn--$84.55; +1.89; optionable (LLL): Telecom
http://biz.yahoo.com/p/l/lll.html
STATUS: Made a move up from a Friday "breather" doji, showing a good volume surge on the move up; the stock pushed up for a decent move Thursday though showed lower volume on that move. Thus, we like the stronger volume playing catch-up. We want to see the stock now break the 85 resistance as volume picks up even better from here. Earnings are out April 26. Initial target on a move over 85: March high of 90.51. Relative strength is well out ahead of price, a bullish indicator. Money flow improving.
BUY POINT: Aggressive: Over 86 on continued rising volume. Stop loss: 85.45-85.70.
POSITION: Stock and/or July $85 calls to buy (LLL GQ).
http://www.investmenthouse.com/cd/lll.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.
HI (Household Intl--$59.45; +0.91; optionable (HI): Credit Services
http://biz.yahoo.com/p/h/hi.html
STATUS: Continues in the tight trading range of the last several days, holding above the short term MVAs (58.96) and moving up Monday on lower, below average volume of 1.36 million (avg. 1.9 million). Held down by resistance at the 60 level, the stock is nonetheless being squeezed by that and the lower moving averages. We are looking for a pop out of this consolidation, and like today's drop in volume. The stock can drop back down to the support, but we will look for a break through the resistance when volume surges back in. Target on a move over the March high of 62: $68-71.
BUY POINT: Aggressive: Over 60 on rising volume. Stop loss: 59.50-59.75. New high: Over 62 on volume of 1.8 million or better. Stop loss: 61.50-61.75.
POSITION: Stock and/or July $55 or $60 calls to buy (HI GK or GL).
http://www.investmenthouse.com/cd/hi.html
MEMBER PORTFOLIO: BRCM, CHKP, CSCO, EMLX, IDTI, INTC, JDSU, MVSN, NT, PWER, SUNW, VTSS
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 sells off. 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.
OEX (Standard & Poors 100--$581.47; +4.12; optionable (OEB):
STATUS: The index tapped resistance on the high of 586.67 (18 day MVA at 589.22) on lower volume of 998,000 (avg. 1.2 million). Currently sitting on top of the 10 day MVA (581.31), the index can test that level again in a rally, but we will look for a turn back down since the 18 day MVA has been staunch resistance over the last 2 months. Target: 560-561 range.
BUY POINT: On a move down after a retest of the 18 day MVA (589), or on a move below the 10 day MVA (581) on stronger, selling volume.
POSITION: May $595 puts to buy (OEB PS).
DJX (1/100 Dj Indu--$98.54; +0.54; optionable (DJV):
STATUS: Showing a wedging-type pattern as volume dropped back for the 3rd day, finally reaching below average levels Monday (998,000; avg. 1.2 million). The high reached 99.35, but the index dropped back to close just under the 18 day MVA (98.49). On a move back down from here and break of the 10 day MVA (97.73), we will look at buying puts with a target of 95 or lower (April low is 93.76).
BUY POINT: On a break below the 10 day MVA (97.73) on selling. On a break of the support, the index can move back up to test the break; entry point is on a move back down from there.
POSITION: May $104 puts to buy (DJV QZ). Deltas not listed; please check with your broker in the morning.
SEBL (Siebel--$30.00; +0.71; optionable (SGW)): Application Software
http://biz.yahoo.com/p/s/sebl.html
STATUS: SEBL was accidentally removed from the weekend report (it was listed in the Best Plays). The stock moved over the 18 day MVA (29.20) despite the continued decreasing volume (12.3 million; avg. 1.7 million), so unless the market enters some heavy selling, we may see a hold at this support level. The 10 day MVA was tapped on the low of 28.73, additional support. On the move today and the support levels, we aren't looking at the stock for new put positions at this time.
Continued Puts:
CHKP (Check Point--$52.07; +4.82; optionable (KEQ)): Security Software
http://biz.yahoo.com/p/c/chkp.html
STATUS: Written for both up or downside on the weekend report, and the stock headed up Monday, though on lower volume (11 million; avg. 10.6 million), hitting our target for the upside play at the 18 day MVA (52.65). The stock is in prime position for a move back down (the moving average pushed it back consistently since February), so if the Nasdaq does begin selling back down, we will look buying puts on a move back down toward the April low (41.38). Potential support at 50 and in 46 range so watch unless selling is strong. This can be a fast moving stock either way.
BUY POINT: Aggressive: On a move back down from here in market selling.
POSITION: May $65 puts to buy (KEQ QM; 25 open interests).
BEAS (Bea Systems--$29.10; +0.72; optionable (BUC): Business Software
http://biz.yahoo.com/p/b/beas.html
STATUS: Moved up to the 18 day MVA (29.62) and even broke above it on the high of 31.50, but couldn't hold that, dropping back down to close near the low (28.60) on stronger volume (27.3 million; avg. 14.8 million). Still looks ready to make a move back down, particularly since the doji at the top of the 3-day run suggests that action. The 18 day MVA has held the stock back for 2 months. Target: 20-21.
BUY POINT: On a move back down from here, in market selling.
BUY POINT: May $45 puts to buy (BUC QI; 10 open interests).
EMC (Emc--$30.79; +0.64; optionable (EMC): Computers: Data Storage
http://biz.yahoo.com/p/e/emc.html
STATUS: Climbed back on top of the 10 day MVA (30.60) on stronger volume (20 million; avg. 20.5 million); we are still looking for a turn back down, from the 18 day MVA (32.50) if the stock makes it up to that resistance (since February). On that move in market selling, our target is the April low of 25.05.
BUY POINT: On a move back down from here or the 18 day MVA (32.50) on selling.
POSITION: May $40 puts to buy (EMC QH).
LEH (Lehman Bro--$59.50; -0.50; optionable (LEH)): Brokerage
http://biz.yahoo.com/p/l/leh.html
STATUS: Moved back down from a test of the 10 day MVA (61.35), but volume wasn't what we wanted for the put play; it dropped back to 2.4 million (avg. 2.8 million). We want to see stronger selling volume to play the stock below our other targeted support, 59, for looking at put positions. Target: April low of 54.
BUY POINT: On a move below 59 on strong volume selling.
POSITION: May $70 puts to buy (LEH QN).
VRTS (Veritas Software--$48.34; +3.52; optionable (VIV)): Application Software
http://biz.yahoo.com/p/v/vrts.html
STATUS: Broke over the 10 day MVA on lower volume (11.5 million; avg. 14.2 million), approaching the 18 day MVA (49.78), staunch resistance for the last 2 months. The stock can continue a move up to that resistance, but on a turn back down in market selling, we will look at buying puts with a target of 38.60, the April low.
BUY POINT: On a move back down from the 18 day MVA (49.78) in market selling.
POSITION: May $65 puts to buy (VIV QM).
VRSN (Verisign--$33.60; +0.22; optionable (QVR)): Internet Software
http://biz.yahoo.com/p/v/vrsn.html
STATUS: VRSN broke over the 10 day MVA (33.47) but volume was even lower (5.4 million; avg. 7 million). Showing its third consecutive doji on decreasing volume, the stock will only be a candidate for a put play on a move back through the moving average and in a market sell-off. The pattern suggests a move up on a volume surge, but the stock will have to break resistance at the 18 day MVA (35.29), and VRSN has been unable to accomplish that since late March. Target on selling: 25.38, the April low.
BUY POINT: On a move down after a test of the 18 day MVA (35.29), on strong selling volume.
POSITION: May $45 puts to buy (QVR QI; 7 open interest).
MERQ (Mercury--$40.44; +2.38):
http://biz.yahoo.com/p/m/merq.html
Continued to move up, Monday taking out its 10 day MVA (39.37) and closing just below the next level of resistance, the 18 day MVA (41.65). The pattern again was a doji, and with the weak volume on the move (down to 3.4 million; average 4.7 million), we look for a strong move down in market weakness, with a target at the recent low of 30.75.
BUY POINT: A move below the 10 day in market weakness, looking for above average volume selling.
POSITION: May $50 puts to buy (RQB QJ).
QQQ (Nasdaq 100--$37.05; +0.76; optionable (QQQ):
STATUS: Showing its second doji just under the 10 day MVA (37.76), volume dropping from high levels to below average Monday (51.6 million; avg. 70 million). If the index cannot break the 10 day MVA on stronger volume, we will look at playing a move down on market selling. Target: April low of 33.60 or lower.
BUY POINT: On a move down from here (or from a test of 37.76) on rising, selling volume.
POSITION: May $45 puts to buy (QQQ QS).
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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