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us stock market, trade stock
Begin part 2 of 3
SUBSCRIBER QUESTIONS
Q: I enjoy reading your commentary each day. Besides the technical aspect you have a knack for putting across your point in a very understandable manner. With all the hype about sentiment being bearish and everyone wanting to be a contrarian, is it possible that this time IS "different." It seems that the leaders are performing much better than in the past bear market rallies and the resistance levels are being knocked off one-by-one. Since I don't have access to all the technical information I was wondering if you could compare today with other major market bottoms. Was the sentiment this bearish then and how were the leaders performing? Thanks.
A: Glad you enjoy the commentary and that it is understandable. Your points are well taken and your observations about leadership and resistance levels broken are accurate. Markets cannot sustain a rally if money is not being pushed into sectors and stocks that have solid earnings growth and earnings potential.
With respect to other market bottoms, the action is very similar. In 1974 for instance, the economic outlook was horrible: recession; energy crisis; new environmental laws costing billions of dollars (similar to today's cost of homeland security); inflation combined with unemployment, something that was not supposed to happen according to the Phillip's Curve model the Fed still uses; lack of business investment. It was bad and only expected to worsen according to some very smart economists of the time. Same with the market; it was trending lower and lower, and with the poor economic outlook, there was no sign it was going to get better. Again it was the idea that the economy needed to improve before the market would respond instead of the historical reality that the market would bottom and improve before the economy showed any signs of recovery.
Even with the negative views the market bottomed and started higher with a double bottom pattern very similar to what we have seen in July and October 2002. The economy was still in trouble. Jimmy Carter was elected based on the 'misery index' of inflation plus unemployment. Yet things did not show much improvement for the rest of the 1970's. It was not until the Emergency Economic Recovery Act of 1981 that slashed taxes and encouraged massive business investment that the economy really beat inflation and exploded higher. The issues may not be identical, but the parallels between the major items then and now are striking. The patterns of the indexes are striking. The predictions of further economic turmoil of cataclysmic proportions is striking. Things may seem different but they really are not. Thus this rally out of the downtrend may indeed really be different from the others not only for the attributes it is showing on its own, e.g., accumulation, leadership, and breadth.
SEMINARS ON CD
http://www.stockseminarsonline.com
This is Jon Johnson's own site devoted exclusively to seminars designed to teach you what you need to know about the stock market and stock movement and how to take advantage of those moves without incurring the usual high costs of travel and related expenses usually associated with seminars.
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 movers on Friday: ADTN; AMT; CEDC; DSPG; EBAY; FDX; FFIV; GENZ; GPRO; IGLD; SCSS; XLNX and others.
NEW PLAYS:
Play Date: 05/10/2003
BSC (Bear Stearns--$68.92; +1.47; optionable): Investment brokerage
http://biz.yahoo.com/p/b/bsc.html
STATUS: Testing the breakout. BSC broke from a 4-month flat base in March and has since moved laterally on below average volume. During the lateral move from November to the current move, accumulation has been solid at 9 up weeks on rising volume to 3 down weeks on rising volume. As with most financials, money flow has been very strong. Friday BSC made a higher low in the range and posted a solid gain on sharply increasing, above average volume. Looking for a breakout from this range as financials continue to improve and help lead the market.
Volume: 1.977M Avg Volume: 1.284M
BUY POINT: $70.35 Volume=1.9M Target=$80 Stop=$67.95
POSITION: BSC GN - July $70c (49 delta)
http://www.investmenthouse.com/cs/bsc.html
Play Date: 05/10/2003
POWI (Power Integrations--$24.13; +1.13; optionable): Semiconductor integrated circuits
http://biz.yahoo.com/p/p/powi.html
STATUS: Flat base. POWI is moving in a 4-month lateral base between 20 and 24, showing solid 5 to 3 accumulation as it does. This past week POWI tested the top of the range and then pulled back to hold the 18 day MVA on the Friday low (22.75). It bounced solidly off that level on rising volume. This higher low in the base and good recent price/volume action indicates that POWI is ready to make the breakout this week. When it does we will move in.
Volume: 540.315K Avg Volume: 646.636K
BUY POINT: $24.55 Volume=970K Target=$29.45 Stop=$22.83
POSITION: QPW JE - Oct. $25c (53 delta) &/or Stock
http://www.investmenthouse.com/cs/powi.html
Play Date: 05/10/2003
PRAA (Portfolio Recovery--$25.92; +0.52; no options): Purchases & then collects overdue consumer receivables
http://biz.yahoo.com/p/p/praa.html
STATUS: Testing the breakout. A new issue in November, PRAA formed a short base from February to mid-April. It broke out at that point and rallied to 28. It is now testing that move, holding above the 18 day MVA (25.69) on this test. Accumulation in the stock is solid at 7 to 2, and it sports solid money flow. After this test we are looking for a move up on rising volume. Volume was not there Friday, but we anticipate trade to increase this week as PRAA continues the move higher.
Volume: 51.492K Avg Volume: 123.272K
BUY POINT: $26.45 Volume=185K Target=$31.75 Stop=$25.25
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/praa.html
New Pre-Splits
Play Date: 05/10/2003
UNH (Unitedhealth Group--$93.49; +1.28; optionable): Health care plans. Splits 2:1 on 6-19-03
http://biz.yahoo.com/p/u/unh.html
STATUS: Cup with handle. This is a pre-split that just happens to be in a good pattern as well. UNH is in the handle of a 7-month base showing solid 7 to 3 accumulation. It has been working on the handle, the lateral and slightly lower trading range that shakes out the final sellers, the past 3 weeks. Volume has been trailing off, down all last week on lower and lower below average trade. That is very good handle action as it shows fewer and fewer sellers even as the stock moves lower. Pretty soon the sellers are gone and good old supply and demand takes over and the stock breaks out. Looking for a stronger volume break higher to initiate some positions.
Volume: 871.6K Avg Volume: 2.31M
BUY POINT: $93.74 Volume=2M Target=$100 Stop=$91.22
POSITION: UHB FR - June $90c (72 delta) or UHB IS - Sept. $95c (49 delta)
http://www.investmenthouse.com/cs/unh.html
CONTINUING LEADER PLAYS
Upside:
Play Date: 05/01/2003
DCTM (Documentum--$18.96; +0.24; optionable): Application software
http://biz.yahoo.com/p/d/dctm.html
STATUS: Testing the breakout. Still testing the breakout, but starting to move higher Friday after a tapping at the 10 day MVA on the low (18.61) and rebounding on some rising though still below average volume. Excellent money flow and solid 7 to 4 accumulation in the base. Friday gave us a hint it is ready to move back up as overall market was lower but more buyers were moving into DCTM.
Volume: 769.626K Avg Volume: 1.13M
BUY POINT: $19.75 Volume=1.8M Target=$24 Stop=$18.32
POSITION: QDC GW - July $17.50c (77 delta) &/or Stock
http://www.investmenthouse.com/cs/dctm.html
Play Date: 05/08/2003
DRIV (Digital River--$16.95; -0.2; optionable): Business software
http://biz.yahoo.com/p/d/driv.html
STATUS: Testing the breakout. DRIV spent Friday continuing to test the breakout from its 4.5 month base. Volume was lower again, still below average volume as DRIV held above the 10 day MVA (16.70). We are just being patient and waiting for that strong accumulation and money flow to start it back up.
Volume: 717.908K Avg Volume: 916.227K
BUY POINT: $17.45 Volume=1.4M Target=$20.95 Stop=$16.23
POSITION: DQIIW - Sept. $17.50c (54 delta) &/or Stock
http://www.investmenthouse.com/cs/driv.html
Play Date: 04/29/2003
FDRY (Foundry Networks--$11.87; +0.21; optionable): PC peripherals
http://biz.yahoo.com/p/f/fdry.html
STATUS: Testing the breakout. Nice doji Friday as FDRY continues the test of its strong breakout from the 5-month base. Volume was lower and remained well below average, showing very few sellers. The stock looks ready to turn back up and again follow money flow higher.
Volume: 2.213M Avg Volume: 2.926M
BUY POINT: New: Not making a deeper test. $11.98 (orig. $10.90) Volume=4.4M Target=$13.15 Stop=$10.74
POSITION: OUJ IB - Sept. $10c (64 delta) &/or Stock
http://www.investmenthouse.com/cs/fdry.html
Play Date: 04/23/2003
FFIV (F5 Networks--$15.44; +0.81; optionable): Internet software and services
http://biz.yahoo.com/p/f/ffiv.html
STATUS: Ascending Triangle. FFIV is making the breakout, rallying Friday on rising though still below average volume. Looking for more volume as it pushed higher in the continued breakout. Solid 7 to 3 accumulation in the base.
Volume: 488.277K Avg Volume: 486.318K
BUY POINT: New: $15.65 (orig. $15.30) Volume=750K Target=$18.32 Stop=$14.05
POSITION: FLK GC - July $15c (52 delta) &/or Stock
http://www.investmenthouse.com/cs/ffiv.html
Play Date: 04/29/2003
GSPN (Globespan--$6.89; +0.36; optionable): Semiconductor integrated circuits
http://biz.yahoo.com/p/g/gspn.html
STATUS: Testing the breakout. After a strong breakout in early May, GSPN has already made a quick and shallow test on lower volume, falling back to the 10 day MVA (6.47) on the test. Friday GSPN started moving up off the 10 day, rising on some stronger though still below average volume. With lower overall market volume, the increase was good to see and is a portent of the move this week when more volume enters.
Volume: 1.567M Avg Volume: 1.582M
BUY POINT: New: $6.98 (orig. $6.39) Volume=2.1M Target=$8.25 Stop=$6.05
POSITION: GLQ HA - Aug. $5c (82 delta) &/or Stock
http://www.investmenthouse.com/cs/gspn.html
Play Date: 03/20/2003
LLTC (Linear Technology--$36.34; +1.33; optionable): Semiconductors
http://biz.yahoo.com/p/l/lltc.html
STATUS: Cup w/handle. LLTC has moved out of its cup with handle and is now forming a short ascending triangle on top of that prior base, rising up the 18 day MVA (34.84) as it makes higher and higher lows. Friday LLTC was moving toward the breakout on rising, average volume. We are looking for the next breakout this week to add to positions. This stock could really fly on the breakout.
Volume: 7.148M Avg Volume: 6.67M
BUY POINT: New: $36.75 (orig. $34.97) Volume=7M Target=$40.48 Stop=$34.55
POSITION: LLQ HZ - Aug. $32.50c (63 delta) LLQ EZ - May $32.50c (66 delta) &/or Stock
http://www.investmenthouse.com/cs/lltc.html
Play Date: 04/24/2003
MRGE (Merge Technologies--$8.12; +0.22; no options): PC data storage devices
http://biz.yahoo.com/p/m/mrge.html
STATUS: Testing the breakout. MRGE is testing the move from lat April, pulling back to test the 18 day MVA (7.62) on the low in the test. Friday it started moving up off that level. Now we are looking for another stronger volume upside session to break it through next resistance to add to or create new positions.
Volume: 76K Avg Volume: 46.818K
BUY POINT: New: $8.54 (orig. $8.06) Volume=65K Target=$10.45 Stop=$7.55
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/mrge.html
Play Date: 03/29/2003
WFR (Memc Electronic--$13; +0.1; no options): Semiconductor integrated circuits
http://biz.yahoo.com/p/w/wfr.html
STATUS: Ascending triangle. After a strong breakout from its 3-month base in March, WFR has run up to 13 where it has now formed this pattern the past month, moving up the 18 day MVA on the lows. Friday it tested the 18 day MVA on the low and rallied back on stronger, above average volume. It is poised for the breakout, and we really like these ascending triangles after cup breakouts as they tend to precede larger gains in an uptrending market.
Volume: 277.1K Avg Volume: 227.772K
BUY POINT: $12.4 Volume=200K Target=$15.15 Stop=$12.22
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/wfr.html
PRE-ANNOUNCEMENT PLAYS
We are putting those pre-announcement stocks that are ready to make moves on the report. As the other pre-announcement candidates reach new buy points we will put them on as well. We want to keep the report focused on those stocks ready to make moves.
All current pre-announcements:
AVP
BBBY
BCR
CECO
EBAY
GDW
MME
RARE
WFMI: Gapped down on earnings below the 50 day MVA. Is rallying to recover, and if it reaches 56 (50 day) and cannot move over it, exit time if not already out.
New Pre-Announcement Plays:
Play Date: 05/10/2003
BCR (C.R. Bard--$63.39; +1.7; optionable): Medical instruments. Forecast to announce a split in July with earnings.
BACKGROUND: BCR has not announced a split since the dark ages, but it is now ready for an all-time high.
http://biz.yahoo.com/p/b/bcr.html
STATUS: Ascending triangle. For the past 1.5 years BCR has worked through a cup base and the stock is now back up to the high in the base, moving through a 2-month ascending triangle. Since November it has put together solid 8 to 3 accumulation, using the 50 day MVA (61.48) as the support in the base as it moves toward a breakout over 64. The long term pattern for BCR the past 4 years is a large ascending triangle that has used the 200 day MVA as support. After a lower volume test of the 50 day once again, BCR made a higher low Friday, starting back up on a strong volume surge. Solid accumulation, solid money flow, and it looks as if BCR is ready for that new high.
Volume: 369.7K Avg Volume: 317.818K
BUY POINT: $64.25 Volume=477K Target=$73.75 Stop=$61.55
POSITION: BCR JM - Oct. $65c (44 delta) &/or Stock
http://www.investmenthouse.com/cs/bcr.html
Continued Pre-Announcements:
Play Date: 04/26/2003
BBBY (Bed, Bath & Beyond--$40.15; +0.54; optionable): Home furnishings. Forecast to announce a split in July and we are working on pinpointing a date.
http://biz.yahoo.com/p/b/bbby.html
BACKGROUND: BBBY last announced a 2:1 split in July 2000 at a price of $36.
STATUS: Testing the 10 day MVA. BBBY is still moving up the 10 day MVA, flattening out the move somewhat the past week as volume drops off well below average. It is showing dojis over the 10 day MVA (39.65). It looks as if it is going to move laterally a few more sessions and then give another move higher. Strong money flow still.
Volume: 2.031M Avg Volume: 3.335M
BUY POINT: New: 40.88 (orig. $39.12) Volume=4M Target=$46 Stop=$38.75
POSITION: BHQ HU - Aug. $37.50c (57 delta) &/or Stock
http://www.investmenthouse.com/cs/bbby.html
Play Date: 02/15/2003
CECO (Career Education--$60.79; +0.7; optionable): Education and training. No split announcement with earnings on 4-22. Researching another possible date and enjoying the ride while we do.
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 breakout. CECO has made a nice test of the 10 day MVA (59.51) and Friday started back up. Volume was not there yet, but this is the first real test of the short term MVA since the big break higher two weeks back. Looking for the volume to pick up for a new positions to add.
Volume: 489.429K Avg Volume: 707.818K
BUY POINT: New: 61.25 (orig. 52; 48.25)
Volume=1.4M Target=$65 (letting it run as orig. was 58.55) Stop=$58.42
POSITION: CUY GL - July $60c (62 delta, low OI) and/or Stock
http://www.investmenthouse.com/cs/ceco.html
Play Date: 03/08/2003
EBAY (Ebay--$94.67; +1.4; optionable): Internet auctions, sales. No split announced April 22 with earnings, but the move was great. EBAY is going to announce so we are looking for the next possible date.
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. Tapped the 18 day MVA on the low Friday (93.03) and rallying but on continued below average volume. We were looking for stronger volume and Friday was not it. If volume flows in we will can add to positions, but we are really looking for that breakout over the resistance at the top of the two-week lateral range (95.34) for a better comfort level on the next move.
Volume: 4.31M Avg Volume: 5.975M
BUY POINT: New: Aggressive: $94.25; Breakout: 95.65 (orig. 87.25; $80.08) Volume=8M Target=$92 Stop=$91.22
POSITION: QXB GR - July $90c (54 delta) &/or Stock
http://www.investmenthouse.com/cs/ebay.html
Play Date: 05/01/2003
GDW (Golden West Financial--$77.1; +0.56; optionable): Savings & Loan. Forecast to announce a split on 7-16-03 in conjunction with earnings.
BACKGROUND: Last announced a 3 for 1 split on 11-2-99 at a stock price of $114.
http://biz.yahoo.com/p/g/gdw.html
STATUS: Cup w/handle. GDW is not getting the volume to really make the break. Wednesday is showed strong trade but it could not keep the move going into the weekend. Still solid in that pattern, we just want to see a strong breakaway move. Solid 4 to 2 accumulation and excellent money flow.
Volume: 482K Avg Volume: 564.954K
BUY POINT: New: 77.25 (orig. $76.75) Volume=900K Target=$86.75 Stop=$73.65
POSITION: GDW HO - Aug. $75c (57 delta) &/or Stock
http://www.investmenthouse.com/cs/gdw.html
Play Date: 04/30/2003
MME (Mid-Atlantic Medical--$45.94; +0.69; optionable): Health care plans. Forecast to announce a split on 5-8-03 before the market opens in conjunction with earnings.
BACKGROUND: Based upon our research it does not appear that MME has ever split its stock. The annual shareholder meeting was on 4-28-03 at which time no additional shares were authorized. The company has sufficient shares for a 3 for 1 split.
http://biz.yahoo.com/p/m/mme.html
STATUS: Testing the breakout. MME continued the breakout move Thursday and Friday on solid volume. Continued the breakout and now we will let it rally for us. Next buy point will be on a tset of the short term MVA.
Volume: 744.8K Avg Volume: 464K
BUY POINT: No new positions at this point (orig. $45.65; $43.85) Volume=634K Target=$54.45 Stop=$42.45
POSITION: MME II - Sept. $45c (49 delta) &/or Stock
http://www.investmenthouse.com/cs/mme.html
End part 2 of 3
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us stock market
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