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us stock market, trade stock
Begin part 2 of 2
SUBSCRIBER QUESTIONS
Q: On Friday morning, CNBC gave an advisory that Trimtabs.com was indicating that the market would sell off next week do to liquidity problems. Seems that due to a large number of offerings of new stock, they feel that there will not be enough buyers and/or money to absorb the new issues. Seems something like 8 billion dollars worth of stock if I understood correctly. My question is, what do you know about these people, and is their call a legitimate one. I would appreciate and value your call concerning this matter. Also, I am very impressed with you insights on the market. Very informative. Thanks.
A: Thanks for the kind words. Trimtabs issues these reports every time there is a greater than usual number of new offerings coming to market. This could be in the form of IPO's or additional offerings from existing exchange companies. The idea is, as you point out, somewhat intuitive in that there has to be enough demand in the market to buy the stock that is hitting the market. Either the new issues will suffer, existing issues will suffer, or the whole market will suffer as this stock hits the street and pushed up the amount of available product so to speak.
There is some basis in this if you look at stock split plays. As a stock moves into its split it tends to run higher and then back off when it splits as there is much more stock on the market and trade has to be greater to drive shares higher. Of course the price is lower so it is not an exact correlation: a $50 stock split to $25 still takes the same amount of money to impact the price the same percentage. Still we would often see stocks fall right at the split as more stock was on the market. That is not always true, however. One thing we saw in the bear market was stocks actually rallying higher as the split became effective. Basically investors wanted the stock and rallied it higher even though there was 'more' stock in the market. The stocks were rallying on a perceived economic improvement, and big money was moving in at the split and driving it higher.
We have seen many of these Trimtabs calls on market supply. They are very short term calls (the one you reference discussed the next two weeks as being lower). Sometimes the market moves lower, sometimes it moves up. Intuitively it makes some sense. In real life there are many more variables. Primary is the demand for stock, something the Trimtabs calls suupsedly take into account. Right now institutions are accumulating stock. There is still $2 trillion on the sidelines. If insitutions want to continue to buy good stocks they have plenty of capital to do it.
Further, history shows some very important details. First, all during the bull run, new IPO after new IPO hit the market, yet the market continued to move higher. What did that mean? It meant that when demand is high enough, it will absorb new issues. Thus Trimtabs is absolutely right that if there is more supply than demand the market will suffer. But it is the degree of demand that will determine how the indexes perform. There could be excess supply for the ENTIRE market to absorb, but we would most likely see the leaders continue to attract their share of existing funds. Thus even if Trimtabs is right it would be a short term effect and it does not impact the leading stocks to a great extent.
Finally, there is one statistic that flies the the face of an idea that new issues hurts the market. In all important market moves, the number of new issues directly correlates to market performance. New issues tend to become the new market leaders as they bring the latest and greatest technology to market. They tend to have stellar sales and earnings. When a market is healthy, the economy is or is going to be healthy, and new issues start to surface. History shows that markets tend to perform better the more new issues come to market. What drives the market is demand, and we have seen Trimtabs' calls correspond to market activity and we have also seen them not. The question is how much aggregate demand there is. Trimtabs does a good analysis of existing demand based on average shares traded, but that is a crude measure of latent demand.
THE PLAYS
Monday and Wednesday we provide an update with best plays for the next session.
Good movers Monday: ADSK; ADTN; ALGN; BBBY; BCR; CECO; DRIV; FDRY; FFIV; HIGK; JPM; KLAC; LM; MRGE; POWI; SEPR; THOR; TSCO; VTAL
NEW PLAYS:
Play Date: 05/12/2003
SFNT (Safenet--$27.71; +1.94; optionable): Security software
http://biz.yahoo.com/p/s/sfnt.html
STATUS: Cup with handle. SFNT was a leader off of the October low, but the security software stocks all hit speed bumps and SFNT corrected back into this 4-month base where it gave back just under half its value. It has spent the last two months forming the right side of the base that shows solid 7 to 3 accumulation. Monday SFNT made a breakout move from the handle on solid, above average volume. It closed well off of its intraday high (28.70), but the pattern and volume indicated buyers. What we like about this play is that it can run up to the high in the pattern (32.21 in January) and still give us a nice return on stock positions. If it is strong it should move even higher and give us a bigger gain.
Volume: 488.857K Avg Volume: 262.59K
BUY POINT: $28.11 Volume=394K Target=$32.35 (initial) Stop=$26.14
POSITION: UUI IE - Sept. $25c (69 delta) or UUI IF - Sept. $30c (46 delta) &/or Stock
http://www.investmenthouse.com/cd/sfnt.html
New Post-Split:
Play Date: 05/12/2003
COLM (Columbia Sportswear--$47.1; +0.77; optionable): Sports clothing
http://biz.yahoo.com/p/c/colm.html
STATUS: Cup with handle. COLM is working through a 5-month base showing good 6 to 4 accumulation. It has spent the past two weeks forming the handle or shakeout on lower and lower volume. These low volume pullbacks are what gets rid of the final sellers right at the old high. Once they are gone those holding the stock don't want to sell, demand outstrips supply and then the stock price jumps.
Volume: 393.999K Avg Volume: 523.318K
BUY POINT: $48.08 Volume=785K Target=$57 Stop=$44.88
POSITION: TQQ GI - July $45c (69 delta) or TQQ JJ - Oct. $50c (41 delta) &/or Stock
http://www.investmenthouse.com/cs/colm.html
CONTINUING LEADER PLAYS
Play Date: 04/28/2003
MED (Medifast--$8.26; -0.49; no options): Wholesale health and diet products
http://biz.yahoo.com/p/m/med.html
STATUS: Testing the breakout. After a massive breakout earlier in the month, MED has come back to test the 10 day MVA on lower volume, tapping that level on the Monday low (8.00) and then rebounding. This was a new issue in December, and it spent this year forming the current cup base that gave way to the big breakout. We love to enter breakouts on the first test of the short term MVA (10 or 18 day MVA) when they bounce up off those levels on rising volume. Solid accumulation and money flow, it looks as if MED is ready to make the move back up.
Volume: 352.6K Avg Volume: 123.863K
BUY POINT: New: $8.42 (orig. $7.12) Volume=145K Target=10.12 Stop=$7.55
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/med.html
Play Date: 03/29/2003
WFR (Memc Electronic--$13.1; +0.1; no options): Semiconductor integrated circuits
http://biz.yahoo.com/p/w/wfr.html
STATUS: Ascending triangle. Volume surged Monday as WFR butted against the top of the pattern once again after holding the 10 day MVA on the open (12.75) after gapping down slightly to start the week. Looks as if it is ready to pop a cork to the upside.
Volume: 610.6K Avg Volume: 232.045K
BUY POINT: New: $13.28 (orig. $12.40) Volume=200K Target=$15.15 Stop=$12.22
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/wfr.html
PRE-SPLIT PLAYS:
Play Date: 05/08/2003
FLIR (Flir Systems--$51.86; -0.01; optionable): Scientific and technical instruments. Splits 2:1 on 5-30-02
http://biz.yahoo.com/p/f/flir.html
STATUS: Testing the breakout. After that surge higher in late April/early May, FLIR is testing the breakout, holding above the 10 day MVA (51.65) and showing a tight doji on below average volume. FLIR is heading into a split on 5-30 and we are looking for a move up on rising volume from this breakout test.
Volume: 222.785K Avg Volume: 265.636K
BUY POINT: New: $52.05 Volume=401K Target=$58.75 Stop=$49.65
POSITION: FFQ GJ - July $50c (57 delta) &/or Stock
http://www.investmenthouse.com/csflir.html
WATCHLIST/ CONTINUING
Stock Date Play Close +/- Pivot Tgt Vol TgtV Stop
ADSK 03/25 Cup hdl 16.85 +0.46 16.3 19.45 1.6M 1.8M 15.72
Current.
ADTN 04/15 Cup hdl 46.95 +1.9 40.88 46.95 1.3M 1.2M 42.12
Target Hit.
ALGN 04/29 Test 50 8.7 +0.69 7.45 9.25 456K 378K 7.05
Current.
ALTR 04/15 Rv H&S 17.4 +0.26 15.75 18.81 6.9M 12M 16.02
Current.
AMAT 04/18 BO 15.72 +0.64 15.6 19 42M 32M 14.51
Current.
AMT 04/30 Test 50 7.68 +0.18 6.84 8.35 1.1M 2.1M 6.88
Current.
APOL 04/12 A Wedge 57.17 +0.71 52.75 59 1.6M 2.7M 54.25
Current.
APOL 02/18 A Wedge 57.17 +0.71 46.25 52.88 1.6M 22M 54.25
Current.
ASCL 05/07 FlyPlat 3.83 -0.01 4.05 4.96 995K 1.7M 3.77
Buy Not Hit.
AVP 03/29 BO 56.93 -0.16 57.58 65.88 1.4M 1.7M 56.74
Current.
BBBY 04/26 Test 18 41.32 +1.17 39.12 46.55 3.3M 4M 38.75
Current.
BCGI 04/24 Test BO 17.44 +0.43 18.55 22.26 811K 431K 17.55
Current.
BCR 05/10 A Wedge 65.35 +1.96 64.4 73.75 577K 477K 62.25
Current.
BLL 03/03 A Wedge 55.3 -0.69 54.22 62 454K 550K 55.74
Current.
BPOP 04/03 Cup hdl 37.95 +0.06 35.25 40.45 279K 200K 36.48
Current.
BRL 01/27 Test 18 52.63 -0.36 51.88 62 1.2M 875K 55.55
BSC 05/10 BO 69.62 +0.7 70.35 80 1.2M 1.9M 67.95
Buy Not Hit.
CAH 04/09 Put 58.41 +0.71 55.96 52 2.4M 3.5M 54.74
Current.
CECO 02/15 Cup hdl 62.2 +1.41 52.05 58.55 621K 1.4M 58.42
Current.
CEDC 05/08 Test BO 31.83 +0.09 31.78 36.55 334K 186K 28.84
Current.
CNQR 04/22 Test 18 5.95 -0.13 6.12 7.42 169K 250K 5.65
Buy Not Issued.
COLM 05/12 Cup hdl 47.1 +0.77 48.08 57 394K 785K 44.88
New.
CTXS 03/29 Cup hdl 19.07 +0.33 14.12 17.25 2.5M 5.3M 17.94
Current.
CYBX 04/18 Test BO 21.9 -1.23 22.55 26.75 808K 325K 22.55
Exited. Gapped below the 18 day MVA on strong volume.
CZN 04/24 Cup hdl 11.99 +0.14 11.34 13.57 2.1M 156K 10.96
Current.
DCTM 05/01 Cup hdl 18.92 -0.04 19.75 24 1.8M 1.8M 18.32
Current.
DRIV 05/08 Test BO 17.86 +0.91 17.62 20.95 1.5M 1.4M 16.23
Current.
DSPG 04/26 Test BO 22.2 +0.46 21.1 25.1 422K 300K 20.25
Current.
DSPG 04/09 Test BO 22.2 +0.46 19.35 23 422K 308K 20.25
Current.
EBAY 03/08 BO 94.74 +0.07 80.08 92 5.1M 8M 91.22
Current.
ELAB 03/06 Cup hdl 30.82 +0.23 24.06 28.88 221K 325K 29.75
Current.
ERES 04/30 PreSplt 30.69 +0.79 30.15 35.15 243K 496K 31.28
Current.
ERES 01/30 Cup hdl 30.69 +0.79 21.55 28.55 243K 436K 31.28
Current.
FDRY 04/29 Cup hdl 12.64 +0.77 10.9 13.15 4.8M 4.4M 10.74
Current.
FDX 03/24 Cup hdl 63.34 +1.29 57.85 66 1.9M 2.2M 59.75
Current.
FFIV 04/23 A Wedge 16.46 +1.02 15.3 18.32 967K 750K 14.05
Current.
FLIR 05/08 PreSplt 51.86 -0.01 51.7 58.75 223K 401K 49.65
Current.
GDW 05/01 Cup hdl 77.27 +0.17 77.25 86.75 426K 900K 75.45
Buy Not Issued.
GENZ 05/03 Test BO 41.04 -0.11 41.32 49.88 3.4M 4.9M 38.83
Buy Not Issued.
GPRO 04/05 Dbl btm 36.33 +0.68 26.5 30.75 677K 521K 32.65
Current.
GSPN 04/29 Cup hdl 6.98 +0.09 6.39 8.25 2.7M 2.1M 6.05
Current.
GTRC 04/07 A Wedge 23.35 +0.13 22.78 26.15 607K 455K 22.55
Current.
HITK 03/22 Cup hdl 37.45 +1.85 19.35 28.75 389K 235K 32.88
IART 04/24 FlyPlat 26.5 +0.51 26.25 32 259K 485K 25.45
IGLD 04/21 Cup 6.05 +0.19 4.3 6.45 407K 543K 4.75
Current.
IMN 04/29 Put 34.4 +0.1 33.94 30 730K 450K 35.04
Buy Not Issued.
JPM 04/01 Test BO 30.94 +0.86 24.96 28.55 8.8M 1.2M 28.88
Current.
KLAC 04/02 Test 50 43.63 +1.14 39.4 45.48 12M 13M 40.65
Current.
KSWS 04/21 FlyPlat 29.7 -0.34 30.66 35.75 175K 304K 29.35
LCI 05/06 Cup hdl 17.15 +0.03 17.22 20.51 178K 187K 15.96
Current.
LIZ 04/14 Cup hdl 34.17 +0.49 32.65 27.45 596K 883K 31.92
Current.
LLTC 03/20 Cup hdl 36.77 +0.43 34.97 40.48 5.6M 7M 34.55
Current.
LM 05/06 Cup hdl 59.11 +1.41 58.5 67.78 628K 610K 55.72
Current.
MED 04/28 Cup hdl 8.26 -0.49 7.12 8.95 353K 145K 6.42
Target Hit.
MER 04/28 Cup hdl 42.6 +0.43 41.55 47.45 4.2M 7.5M 40.55
Current.
MME 04/30 BO 45.67 -0.27 45.65 54.45 1.2M 634K 42.45
Current.
MRGE 04/24 Rv H&S 9.1 +0.98 8.06 10.45 379K 65K 7.55
Current.
MUSE 05/03 Test 18 8.06 +0.21 7.75 9.35 760K 2M 7.05
Current.
MVL 03/03 BO 19.4 +0.65 11.82 21 1.5M 675K 17.55
Current.
NVDA 05/08 Cup hdl 20.77 -0.6 17.55 21.25 25M 11M 16.32
Buy Not Issued.
NVLS 05/06 Flat 29.25 +0.56 30.28 36 7.9M 11M 28.16
Buy Not Hit.
PFCB 04/12 Cup hdl 42.52 -0.04 42.5 49.94 861K 964K 41.55
Current.
PIXR 04/18 Cup hdl 57.5 +0.89 59.34 68 772K 875K 55.19
Current.
POWI 05/10 Flat 25.23 +1.1 24.85 29.75 1M 970K 23.11
Current.
PRAA 05/10 Test BO 25.6 -0.32 26.45 31.75 222K 185K 25.25
Buy Not Hit.
PSUN 03/15 Cup 24.33 +0.95 20.4 24.25 1.4M 1.6M 22.45
Current.
PWN 05/07 BO 11.45 +0.01 11.42 13.75 128K 117K 10.62
Buy Not Issued.
QCOM 04/16 Put 31.12 +0.01 32.56 29 15M 16M 30.28
QLGC 03/15 Test BO 47.45 +0.7 38.85 45 5.1M 11M 42.22
Current.
QLGC 11/07 Test BO 47.45 +0.7 41.4 50 5.1M 25M 42.22
RARE 04/08 Cup 28.96 -0.57 30.06 36 190K 275K 29.12
Buy Not Issued.
RECN 05/03 Cup hdl 22.64 +0.14 23.74 28.25 73K 195K 21.96
Buy Not Hit.
SCSS 04/26 Cup hdl 14.84 +0.33 12.22 16 803K 696K 12.94
Current.
SEPR 04/12 Test BO 20.3 +0.97 17.1 21 2.3M 1.8M 18.05
Current.
SFNT 05/12 Cup hdl 27.71 +1.94 28.11 32.35 489K 394K 26.14
New.
SIGM 05/06 Cup hdl 7.81 -0.2 7.58 9.55 136K 125K 7.05
Buy Not Issued.
SLM 05/01 Test 50 112.35 +3 113.4 117.45 1.1M 975K 111
Exited.
SOHU 03/20 Dbl btm 19.27 +0.47 10.55 21.45 1.2M 800K 16.55
Current.
SPLS 03/31 Test 50 20.9 +0.21 20.3 23.55 6.8M 5M 19.55
Current.
THOR 04/05 Test BO 14.06 +0.8 13.5 16.26 1M 721K 12.74
Current.
TSCO 04/24 Cup hdl 44.86 +1.25 43.75 52 701K 603K 41.94
Current.
TSCO 04/03 Rv H&S 44.86 +1.25 38.6 44.38 701K 577K 41.94
Current.
UCBH 03/24 Cup 26.93 +0.24 22.03 24.75 150K 200K 25.25
UNH 05/10 PreSplt 94.21 +0.72 93.74 100 1.1M 2M 91.22
Buy Not Issued.
UOPX 05/03 BO 46.73 +1.48 46.68 56 213K 370K 43.41
Buy Not Issued.
VRNT 05/05 Cup hdl 21.24 +1.48 22.92 27.55 406K 245K 21.32
Current.
VRTY 05/03 BO 18.88 +0.66 18.7 22.25 484K 938K 17.39
Current.
VTAL 04/23 Cup hdl 16.98 +0.83 14.25 17.12 525K 150K 15
Target Hit.
WFR 03/29 FlyPlat 13.1 +0.1 12.4 15.15 611K 200K 12.22
Current.
WFR 02/22 Flat 13.1 +0.1 9.35 14 611K 217K 12.22
Current.
WPI 05/05 Flat 35.83 +0.35 31.62 38 1.3M 1.9M 31.92
Current.
XLNX 03/20 Test BO 29.2 +0.39 28.05 34.55 8.6M 14M 26.88
Current.
ZQK 05/01 PreSplt 17.52 +0.37 16.88 18.93 502K 350K 15.96
Current.
Good Investing!
Jon L. Johnson and the Stock Split Report 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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