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stock watch, stock prices
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5/27/03 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Tuesday: FLSH; BRCM
Buy alerts issued: BGEN; CMVT; ADPT; HTCH; NVDA; NVLS; STX; APOL
Trailing stops issued: None issued
Stop alerts issued: SLAB; CAH
Stocks race ahead from the open.
We remember the sessions returning from holiday when the sellers would jump on the market and rout it to the downside. That was a sign of the overall negative market view: when everyone was back from holiday the real business of selling would resume anew. During the rally from October there has been a reversal of that action. The market tends to be a bit sloppy ahead of the holiday as positions are squared up for a long weekend, but when the majority of investors return the market they return as buyers and the market rallies ahead. As discussed in the weekend report, the market character is different right now as it faces hurdle after hurdle and keeps overcoming them.
Volume surged back above average and breadth was well over 2:1 as techs attracted the buyers Tuesday. Friday the small and mid-caps were leading as they started to rally ahead of the overall market again. Leaders were up Friday and they were storming up again Tuesday with several more breakouts on the strong volume. That was enough to push all key indexes over their May highs with Nasdaq and Russell 2000 (small caps) at new post-July 2002 highs. That means those indexes have broken the string of lower highs and are in an actual uptrend as the Tuesday move buried the potential head and shoulders patterns as the indexes and many of their components sporting the same patterns rallied through the pattern tops.
THE MARKET
Soft open, sharp rally. The indexes opened lower, tested near support at the 18 day MVA in the first half hour, and then started rallying. It was a steady uptrend all session though the bulk of the move occurred before lunch. Stocks continued to work laterally and slightly higher all session, refusing to give back any gains. Volume built all session as buyers kept moving into stocks as opportunity arose.
Tech stocks were the early leaders and they held the dominant position the entire session though the other large cap indexes put on a good chase. After leading the way Friday, the smaller issues took a back seat though many of their components did post solid gains. All indexes blew through their May highs, however, and did so with solid volume. Buyers were clearly back and clearly in control as the large caps followed the Friday moves of the Russell 2000 and SP400 (mid-caps). Once again as seen throughout this rally, the smaller issues started the move and then the large cap issues followed. As we have often noted, smaller issues tend to perform well just ahead of economic recovery. This outperformance is sometimes subtle such as leading the moves higher and sporting many of the leading stocks. That has definitely been the case in this move and it is a continued positive.
Market Sentiment
The market continues to ignore the weak VIX, something it can do for extended periods. Volatility measures are not great timing mechanisms though at some point the piper has to be paid.
VIX: 21.77; +0.39
VXN: 29.28; -0.45
Put/Call Ratio (CBOE): 0.63; -0.11
Nasdaq
Blew through the May high, another high low and higher high since the string of lower highs was broken with the November move over the August high.
Stats: +46.6 points (+3.09%) to close at 1556.69
Volume: 1.938B (+33.68%). The best volume since the May peak on 5-15. The excellent price/volume action continues with buyers surging back in.
Up Volume: 1.714B (+794M). Upside volume swamped downside volume as buyers swarmed stocks.
Down Volume: 198M (-288M)
A/D and Hi/Lo: Advancers led 2.6 to 1. Huge breadth as buyers again took control
Previous Session: Advancers led 1.42 to 1
New Highs: 284 (+126)
New Lows: 6 (-8)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Excellent action as techs led the market and cleared the May high (1553) on that strong volume surge. Nasdaq again clears another hurdle and breaks up the short head and shoulders pattern that was trying to form. Nasdaq has been the market leader from the bottom and it continues to lead with the smaller issues now. It has next resistance at the May 2001/January 2002 intraday high down trendline (1570). The May 2002 low is at 1573. That puts another layer of resistance ahead, right after the 15% over the 200 day MVA level (1560). That poses another test for the Nasdaq as it once again rallies up off another test lower. As it moves to next resistance and then approaches the 20% level over the 200 day MVA (near 1630) we will watch to see if it starts to struggle again. For now this was a strong move to post another high.
S&P 500/NYSE
As with Nasdaq, the large caps blew through the May high, falling just short of the December intraday high.
Stats: +18.26 points (+1.96%) to close at 951.48
NYSE Volume: 1.512B (+26.4%). Strongest volume in two weeks as the large caps turned off the 18 day MVA on a nice buyside volume surge.
Up Volume: 1.277B (+524M)
Down Volume: 245M (-167M)
A/D and Hi/Lo: Advancers led 2.4 to 1. Solid breadth on NYSE as all stocks rose together.
Previous Session: Advancers led 1.97 to 1
New Highs: 417 (+49)
New Lows: 9 (-2)
The Chart: http://www.investmenthouse.com/cd/$spx.html
The large caps had the look of a stall out coming off the test lower last week, but where they could not find upside volume last week they found it Monday with everyone back at work. The index moved over the May high (948.65), using that volume to close near the session high as it refused to give back gains. It came close to taking out the December high (954.28 intraday), and that appears to be finally in serious jeopardy. Then comes the most important move. That entails taking out the August 2002 high (965). SP500 and DJ30 have yet to join Nasdaq in taking out the August highs. That is the point where the large caps will have broken the string of higher lows, and that would provide a good confirmation to the Nasdaq move.
DJ30:
The blue chips had a good day of their own, posting its third up session out of 4 on a solid volume move. They too cleared the May highs (8744), but DJ30 still has the January (8869), December (9043), and August high (9077) to clear. Obviously it is not clear of its string of lower highs just yet as DJ30 follows along with the other indexes.
Stats: +179.97 points (+2.09%) to close at 8781.35
Volume: 1.512B (+26.4%)
The Chart: http://www.investmenthouse.com/cd/$indu.html
WEDNESDAY
Encore performance in store? The market again broke higher after looking at bit shaky. It tested the breakout move from the cup with handle last week and succeeded with a new break higher. The strength was impressive with volume, breadth, and leadership hitting on all cylinders. It was a strong move and there is always concern of some give back, but with a strong breakout the stage is set for further upside.
Durable goods orders are out before the market opens, and that could provide a bit more fuel if positive. What is clear is that buyers, big money buyers, are using dips as entry points, the reverse of using rallies as selling points. After getting a bit shaky, volume continues to jump up on rising sessions and back off on down sessions. That is a classic footprint of buyers moving into the market to buy.
If some stocks were extended over the weekend, they are even more so now. As we saw, however, the market rotates from sector to sector, and while some leaders started back up last week ahead of the market, others were setting up for moves Tuesday with many making the break higher. There are more of these still setting up as they tend to do in a healthy market. The early breakouts are the stocks with the most strength; they are the ones money went into first and continues to move in when opportunity presents. Others complete their bases as those move higher. Then there is the ebb and flow as some stocks pullback and test the move while others move higher; sort of a mini rotation within the market. That rotation of money is positive and it shows continued buyside interest.
Support and Resistance
Nasdaq: Closed at 1556.69
Resistance: The May high (1554) has been cracked. 1567, the mid-June intraday high. 1573 (May 2002 closing low) and 1595 (June 2002 closing high,). Down trendline from the May 2001/January 2002 intraday highs around 1570.
Support: The December intraday high (1522). The 10 day MVA at 1518. The 18 day MVA (1505). The August 2001/January 2002 down trendline (1477). The January high (1467). The exponential 50 day MVA (1454). The March and August highs (1426 and 1427).
S&P 500: Closed at 951.48
Resistance: 954 (December intraday high). 965 (August 2002 peak).
Support: The May high (948). 939, the early May high. 935 (November and January peaks). The 10 day MVA (934). The 18 day MVA (929). Price tops at 911 (July). March and April highs (896 and 905). The 50 day MVA (906) and the 200 day MVA (885).
Dow: Closed at 8781.35
Resistance: November and January highs (8800, 8870). December high (9044).
Support: May high at 8743. The 10 day MVA (8616). The 18 day MVA (8577). 8522 and 8520, the March and April twin peaks. The 50 day MVA (8425). The 200 day MVA (8331).
Economic Calendar
5-27-03
Consumer confidence, May (10:00): 83.8 actual, 83.0 expected, 81.0 April.
Existing home sales, April (10:00): +5.6% actual, 5.70M expected, 5.53M March.
New home sales, April (10:00): +1.7% actual, 980K expected, 1.01M March.
5-28-03
Durable goods orders, April (8:30): -1.0% expected, 2.0% actual.
5-29-03
Initial jobless claims (8:30): 420K expected, 428K prior.
Preliminary GDP, Q1 (8:30): 1.8% expected, 1.6% prior.
5-30-03
Personal income, April (8:30): 0.0% expected, 0.4% March.
Personal spending, April (8:30): 0.1% expected, 0.4% March.
Michigan sentiment revision, May (9:45): 92.7 expected, 93.2 April.
Chicago PMI, May (10:00): 49.0 expected, 47.6 April.
SUBSCRIBERS QUESTION
Q: Your preferences for upside stocks are the leading stocks at or near 52 week high. Concerning "big money," do they also buy in at or near 52 week highs or are they more in tune to get stocks at lower prices (buy low sell high). Or, are there different schools of thought. Can you explain a little concerning how big money works.
A: With respect to institutional buyers, there are value buyers, there are breakout buyers, and there are combinations of the two. We like the breakouts on strong volume because they tend to show that more than just a few institutions want that stock. For example, during a base there may be a few institutions trying to quietly buy a stock. Perhaps they like the growing earnings and sales or maybe it is some other reason. They continue to buy even as the stock starts to move higher as demand is a bit stronger. More come into the picture, and then when it breaks out perhaps there was an earnings report or some other reason other big money wants a piece of the action. When volume jumps on a strong breakout, that confirms the accumulation of those institutions buying during the base. They were onto something and then the rest of the market wanted it.
So why not buy when a stock is lower, say right at what appears to be the bottom? For one, you don't know if it is the bottom; it is still bumping along under quiet accumulation (maybe). It could go lower. You don't have a clear picture of what the accumulation is. As we saw in the downtrend, buying what you thought was low often was high (remember the strong buys as stocks fell lower and lower in the selloff). We will buy a stock as it comes off of the lows if it shows good accumulation already, has a decent pattern, and is clearing some resistance. We saw that a few times with the chips as they would form up what we called 'building patterns' where they are working on a better pattern but were ready to break higher near term while doing so (a lot of that in October and November). There is no guarantee they will run higher and higher, but those patterns can give nice trades and we will make them and let the run as long as we can.
Another factor is time. How long will a stock bump along before it makes a move? Bases can be a matter of weeks to months to years. Most of the action happens in a short period of time. We like to see the move set up and step in, thus getting maximum impact for our time and money. We can utilize the money on different plays in the interim as opposed to sitting and waiting on a stock to move. Moreover, in an expanding market, the stocks that are in the lead are the ones that make the bigger gains. If there is a strong expansion, the stocks that break higher early on tend to lead and tend to return the bigger gains. Thus while you can buy lower and perhaps pick the right stocks and post a nice gain up to the breakout (and we do have those on the report that we picked up because they were showing early signs of leadership with those 'building patterns'), often the big gains come after the breakout when the rest of the big money moves in to buy the stock. Then what appeared to be a buy at a higher price was actually buying at a point where the stock's strength was proved and you end up buying moderately high and selling a lot higher.
This works best in an expanding market. There are always pockets of strength even in a downtrend (defensive sectors are bought), but in a continuing downtrend many stocks break higher just to fail.
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:
Good movers Monday: Many
New Plays:
Upside:
Play Date: 05/27/2003
JCOM (J2 Global Communications--$36.35; +3.23; optionable): Internet communications software
http://biz.yahoo.com/p/j/jcom.html
STATUS: Cup w/handle. JCOM was an early leader, rallying all of 2002. It fell into a 5-month base November to March, breaking out, but then getting a valuation downgrade after a strong move on outstanding earnings. That downgrade pushed it down hard to the 50 day MVA (30). From there it held and formed the current 6-week cup with handle base. That is rather short for a base, but JCOM is starting to move already and on strong volume. It formed a short, low volume handle last week and then exploded higher Tuesday on above average volume. Strong money flow and solid 3 to 1 accumulation in the short base (3 up weeks on rising volume to 1 down week on rising volume. Following the prior 5-month base, this is good action and we are looking for a breakout.
Volume: 1.024M Avg Volume: 678.272K
BUY POINT: $36.85 Volume=1M Target=$44.25 Stop=$33.94
POSITION: JQF IG - Sept. $35c (61 delta) &/or Stock
http://www.investmenthouse.com/ci/jcom.html
Play Date: 04/28/2003
MER (Merrill Lynch--$42; +1.32; optionable): Investment brokerage
http://biz.yahoo.com/p/m/mer.html
STATUS: Cup w/handle. Taking another look at MER as it has now formed a lower volume handle to its 5-month base after a hard fall through the 18 day MVA (41.25) just two weeks back. Accumulation in the base is solid at 7 to 4, and money flow has continued to hold up and is moving higher again ahead of the stock price. We are looking for price to follow the stock and move on up from here for a nice breakout. Tuesday it started up off a test toward the 50 day MVA on the low (40.23) on some rising volume, a good start toward a breakout run.
Volume: 5.516M Avg Volume: 6.056M
BUY POINT: $43.12 Volume=7.5M Target=$49.55 Stop=$40.1
POSITION: MER JV - Oct. $42.50c (51 delta) &/or Stock
http://www.investmenthouse.com/ci/mer.html
Play Date: 05/27/2003
RHAT (Red Hat--$7.26; +0.35; optionable): System and net software
http://biz.yahoo.com/p/r/rhat.html
STATUS: Testing the breakout. It is a long way from RHAT's heyday, but it has formed a nice 6-month cup with handle base showing excellent 10 to 3 accumulation. It broke out two weeks back, but the market started to get choppy. It then tested back toward the 18 day MVA (6.80) last week, holding that level on the close. Tuesday RHAT shot higher on a strong surge of above average volume. A very nice test of the breakout, and we are looking for positions on a further move higher.
Volume: 1.313M Avg Volume: 957.363K
BUY POINT: $7.45 Volume=1.4M Target=$8.94 Stop=$6.93
POSITION: RCV IU - Sept. $7.50c (50 delta) &/or Stock
http://www.investmenthouse.com/ci/rhat.html
Play Date: 05/27/2003
XLNX (Xilinx--$29.56; +1.71; optionable): Semiconductor
http://biz.yahoo.com/p/x/xlnx.html
STATUS: Testing the 50 day MVA. XLNX never really folded up, forming something of a reverse head and shoulders pattern from December through April. It made an attempt at a breakout in early May, but again, that is when the market was getting choppy and XLNX fell right back to the 50 day MVA (26.39). That is where it held as a stronger stock should, and it bounced back. Tuesday volume surged as it continued the move higher and cleared the May high (29.50). Accumulation since November is excellent at 8 to 3 and money flow is outstanding. Looking for this chip stock to run higher and we are going to go with it.
Volume: 9.016M Avg Volume: 10.581M
BUY POINT: $29.78 Volume=16M Target=$35 Stop=$27.78
POSITION: XLQ IF - Sept. $30c (52 delta) &/or Stock
http://www.investmenthouse.com/ci/xlnx.html
End part 1 of 2
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