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trade stock, stock trader
Begin part 2 of 3
SUBSCRIBER QUESTIONS
Q: I love the service from Investment House!! You are truly a great trader. I have ordered your three technical analysis CDs and can't wait to get them in the mail. I have a question about your target prices. How do you choose your target prices? So many of them seem to be right on target, pardon the pun. That question seems to stump me every time. I have found many stocks setup to move but never know where to set my target price.
A: First we look at market conditions. Is the market uptrending or downtrending, is the trend strong or modest? If we are playing upside in an uptrending market ourtargets will be different from an upside play in an overall downtrend. In the latter case we will shorten our initial targets simply because good moves attract short sellers.
We also look at the type of play we are looking at, i.e., is it a short term trade or are we looking to let it run as far as we can. In most cases we will let the stock continue to run as long as it keeps showing good action and is making enough gain relative to other plays we could be investing in (the opportunity cost factor), but there are some we enter strictly to take the short gain, something we do on the Technical Trader Report.
Then there are the factors particular stock. How far are its typical moves on each run (up or down)? Where is resistance or support (e.g., prior tops, upper channel, overhead suppy)?
We factor all of that in to set the target. Typically, if the marekt is trending higher and stocks are moving well, a breakout stock can move 15% to 20% before it takes a first rest. That is a general rule of thumb and it depends on the other factors above including just how expensive it is. It takes a lot less to drive a $5 stock with average volume of 200K 20% than a $65 stock with average trade of 20M. If a stock makes a fast 20% move on the breakout from a good pattern, it can potentially be a bigger winner. That is why we often use that 20% level as a litmus test or a first target if there are no other resistance areas or we feel the stock is strong enough that it should plow right through existing resistance.
From there we can take some partial profit. With options we often will do that because time is working against us, and if the stock comes back to test after the strong move (as is often the case) we lose not only value in our options but time as well. That makes it harder for the option to get back up to where it was on the first run. We can take a partial and let the rest run. Many stocks on the report now have hit the initial target where we took some gain, and then we let the run from there, looking for the next entry point as long as the stock remains solid.
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. New pre-announcement plays are found in that section.
Good movers Friday: ERES; EVOL; GDW; GPRO; IGLD; INTU; MRGE; SOHU; SSTI; XING
NEW PLAYS: This section includes new plays from all sections other than pre-announcements.
Upside:
Play Date: 07/19/2003
ACV (Alberto-Culver--$54.5; +1.51; optionable): Branded beauty, healthcare & household products
http://biz.yahoo.com/p/a/acv.html
STATUS: Cup w/handle breakout. ACV is breaking out of a 7 month cup with handle base on strong volume and outstanding money flow. Accumulation in the base is solid at 6 up price weeks on rising volume to 4 down weeks on rising volume. Consumer products and retail stocks have formed up well of late, most likely in anticipation of the added stimulus hitting the market when the IRS checks are first issued later this month. This is a nice breakout and we are looking to open some positions on a further move from here on volume.
Volume: 465.2K Avg Volume: 261.318K
BUY POINT: $54.65 Volume=400K Target=$65.65 Stop=$52.75
POSITION: ACV IK - Sept. $55c (45 delta) &/or Stock
http://www.investmenthouse.com/cs/acv.html
Play Date: 07/19/2003
DSPG (DSP Group--$22.94; +0.48; optionable): Telecom equipment
http://biz.yahoo.com/p/d/dspg.html
STATUS: Ascending triangle. DSPG broke out of a 12 month cup with handle base in April, rallied up to 24, and then formed the current 2 month ascending triangle, using the 50 day MVA (21.57) as the bottom as it makes higher and higher lows. Accumulation in the big base was strong at 18 to 7, and during the current pattern it is solid 4 to 2. It just made a higher low at the 18 day MVA on the Thursday and Friday lows (22.28), and from there we are looking for a breakout. We really like this pattern on top of a cup with handle breakout as stocks tend to go on to really good moves.
Volume: 212.459K Avg Volume: 357.492K
BUY POINT: $23.58 Volume=536K Target=$28.35 Stop=$21.93
POSITION: DPQ JX - Oct. $22.50c (58 delta) &/or Stock
http://www.investmenthouse.com/cs/dspg.html
Downside:
Play Date: 07/19/2003
ACS (Affiliated Computer--$43.9; -0.3; optionable): Computer ITS
http://biz.yahoo.com/p/a/acs.html
STATUS: Descending triangle. ACS is back at the bottom of a bearish 2 month descending triangle, a pattern of lower and lower highs with a constant bottom at 44. The highs keep getting lower until the stock breaks through. When it breaks it can drop quickly, and we want to be ready to get in on that move. Tanking money flow is leading the way lower for a breakdown as ACS is trending lower below all of its moving averages.
Volume: 1.125M Avg Volume: 1.891M
BUY POINT: $43.45 Volume=2M Target=$40 Stop=$45.05
POSITION: ACS UI - Sept. $45p (-54 delta)
http://www.investmenthouse.com/cs/acs.html
Play Date: 07/19/2003
WLP (Wellpoint Health--$81.69; +1.52; optionable): Health care plans
http://biz.yahoo.com/p/w/wlp.html
STATUS: Head and shoulders. WLP topped in mid-June right at 90 and then immediately plunged lower. It tried to hold support at 85, but then crashed through the 50 day MVA (82.91) Wednesday on rising volume. It has moved back up for a test of that level, but volume was back below average. This is what we look for after a breach of an important support level: some buyers come back in to get the stock at a 'value', but when it gets back to resistance, that light volume shows there were not many buyers. At that point the sellers come back in and push it lower once more. That is where we step in. We are going to let it move higher on the test toward the 50 day and then catch it as the stock falls back down.
Volume: 971.5K Avg Volume: 1.539M
BUY POINT: Test 82.50ish, then $81.94 on the way back down. Volume=1.6M Target=$77.85 Stop=$83.15
POSITION: WLP UQ - Sept. $85p (66 delta)
http://www.investmenthouse.com/cs/wlp.html
CONTINUING LEADER PLAYS
Play Date: 07/08/2003
AEOS (American Eagle Outfitters--$21; +1.18; optionable): Apparel stores
http://biz.yahoo.com/p/a/aeos.html
STATUS: Cup w/handle. AEOS is trying to make the breakout from its 7.5 month base, rallying Friday past the buy point but on below average volume. Still looks good on this move and we expect more volume will move into the stock early this week, and when we see it that is when we will buy.
Volume: 1.362M Avg Volume: 1.332M
BUY POINT: New: $21.25 (orig. $20.12) Volume=1.9M Target=$24.25 Stop=$18.71
POSITION: AQU KD - Nov. $20c (53 delta) &/or Stock
http://www.investmenthouse.com/cs/aeos.html
Play Date: 06/11/2003
CGFW (Cyberguard--$9.14; +0.64; no options): PC networking hardware
http://biz.yahoo.com/p/c/cgfw.html
STATUS: Testing the breakout. After blasting higher on strong volume a week back, CGFW topped just over 9.50 and has come back to test the move. Last week it found the 18 day MVA on the lows (8.42) and Friday started to bounce off of that level. It hit our buy point for new positions, but volume was well below average. Excellent accumulation and money flow is still showing a positive divergence. Looking for more volume this week to move in as CGFW continues the move.
Volume: 89.029K Avg Volume: 123.5K
BUY POINT: $9.22 (orig. $7.75) Volume=120K Target=$11.12 Stop=$8.44
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/cgfw.html
Play Date: 07/08/2003
HPOL (Harris Interactive--$7.24; +0.14; no options): Internet software
http://biz.yahoo.com/p/h/hpol.html
STATUS: Testing the breakout. Still in a lateral move over the 10 day MVA (7.07), HPOL is forming up nicely on very low, below average volume. Strong money flow and relative strength on top of solid accumulation. Just waiting for it to break out from here on a volume surge.
Volume: 135.862K Avg Volume: 392.05K
BUY POINT: New: $7.38 (orig. $7.22) Volume=541K Target=$8.95 Stop=$6.68
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/hpol.html
Play Date: 07/17/2003
TSCM (The Street.Com--$5.4; 0; no options): Internet information provider
http://biz.yahoo.com/p/t/tscm.html
STATUS: Reverse head and shoulders. Still on the verge of the breakout from its 7 week base showing solid 3 to 0 accumulation that formed on the heels of the breakout from its 5 month base sporting excellent 8 to 4 accumulation. Money flow is excellent, still moving up even as the stock moves laterally. Friday it announced a smaller than expected loss. That did not break it out but it did send volume higher as TSCM showed a doji over the 10 day MVA. Still looking for the breakout move on volume to enter.
Volume: 162.5K Avg Volume: 189.584K
BUY POINT: $5.82 Volume=210K Target=$7.55 Stop=$5.38
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/tscm.html
Play Date: 07/12/2003
VSEA (Varian Semiconductor--$34.03; +0.33; optionable): Chip equipment
http://biz.yahoo.com/p/v/vsea.html
STATUS: Testing the breakout. VSEA broke out of a 7 month base in early July on some excellent volume. Last week when techs enteres a selling mode VSEA pulled back to test the breakout coming to rest Friday right on top of the 10 day MVA, showing a hammer doji on rising, average volume. Relative strength and money flow are excellent, and accumulation is very strong at 10 to 4. An add-to or new positions on a volume bounce.
Volume: 995.88K Avg Volume: 955.617K
BUY POINT: $34.55 Volume=1.4M Target=$40.95 Stop=$32.08
POSITION: UES KG - Nov. $35c (48 delta) &/or Stock
http://www.investmenthouse.com/cs/vsea.html
Play Date: 05/22/2003
WWCA (Western Wireless--$13.55; +0.05; optionable): Wireless communications
http://biz.yahoo.com/p/w/wwca.html
STATUS: Testing the breakout. Still holding the 10 day MVA on the low (13.25) after the breakout 2 weeks back. Strong money flow, accumulation, and relative strength. Looking for a break higher for new positions as WWCA held up well in the selling last week. Wireless telecom is still a strong sector.
Volume: 1.221M Avg Volume: 1.273M
BUY POINT: New: $14.12 (orig. $11.42) Volume=824K Target=New positions: $17 (orig. positions $13.85) Stop=$12.42
POSITION: WRQ HU - Aug. $7.50c (77 delta) &/or Stock
http://www.investmenthouse.com/cs/wwca.html
Downside:
Play Date: 07/17/2003
GRMN (Garmin Ltd.--$40.17; +0.42; optionable): Global positioning devices
http://biz.yahoo.com/p/g/grmn.html
STATUS: Put. After the big dump on volume Thursday, GRMN edged higher on low volume Friday in a reflex bounce similar to the rest of the market. Still looking for GRMN to turn lower as money flow continues to fall. It may try to test higher again toward the 10 day MVA (51.25) before turning back down, but it is struggling.
Volume: 478.537K Avg Volume: 811.258K
BUY POINT: $39.54 Volume=800K Target=$36.48 Stop=$40.72
POSITION: GQR TH - Aug. $40p (-51 delta)
http://www.investmenthouse.com/cs/grmn.html
Play Date: 07/17/2003
BDX (Becton Dickinson--$37.35; -0.03; optionable): Medical instruments
http://biz.yahoo.com/p/b/bdx.html
STATUS: Put. Still struggling below the 50 day MVA (38.08), BDX tried to bounce Friday, but then fell back to flat on rising volume. Still looking for a breakdown on stronger volume.
Volume: 846.5K Avg Volume: 1.079M
BUY POINT: $37.25 Volume=900K Target=$34.25 Stop=$38.35
POSITION: BDX UH - Sept. $40p (-80 delta)
http://www.investmenthouse.com/cs/bdx.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.
APOL: No announcement with earnings on 6-23-03 and researching next date. Held some support at 62.50 so we let it ride another session.
AVP: Forecast 7-23-03 before the open with earnings.
BCR: No split announced with earnings. Holding the 50 day MVA as volume is swelling.
CECO: Forecast 7-22 with earnings.
COH: Forecast 7-29 before the open with earnings.
EBAY: Forecast 7-24 after the close.
ETN: No split announced with earnings. Up off the 50 day MVA, but it needs to break 84 on this move or it has set up a more bearish head and shoulders pattern.
FDO: No announcement with 6-25-03 earnings. Gapped down to the 50 day MVA Friday on rising volume.
GDW: Forecast 7-21 in conjunction with earnings.
HAR: Forecast 7-30 in conjunction with earnings. Exited Thursday with our gain and waiting for it to provide the next buy point.
KRON: Forecast 7-24-03 in conjunction with earnings.
LM: No split announced with the July 17 with earnings. Forming up better over the 10 day MVA (69.35). Could be ready this week.
LXK: Forecast 7-21 before the open in conjunction with earnings. Some nervousness before earnings sent LXK to the 50 day MVA on rising volume.
MME: Forecast in early 8-6 with earnings (company has not confirmed whether before or after). Took some gains last week and now seeing if it will form up again for good entry positions.
SYK: No split announced with earnings on 7-16. Broke to a new high Friday after testing the 50 day MVA on the Wednesday low.
TBL: Announced earnings Friday. Revenues were a hair light and the stock was whacked. As it broke the 50 day MVA we exited.
TSCO: No announce with earnings on 7-14.
UOPX: No announcement with the 6-23 earnings.
New Pre-Announcement Plays:
Play Date: 07/19/2003
BIO (Bio-rad Labs--$61; +4.2; optionable): Scientific & technical instruments. Forecast to announce a split on 7-28-03 before the market opens in conjunction with earnings
BACKGROUND: It does not appear that BIO has ever announced a split.
http://biz.yahoo.com/p/b/bio.html
STATUS: Flat base. After breaking out of a 5 month cup base with a huge gap higher in late April. It shot up to 60 and then formed the current 2 month flat base, consolidating that move on mostly lower, below average volume. Accumulation in that first base was solid at 7 to 5. Money flow is excellent, and after a quick test of the 50 day MVA (56.70) Thursday, BIO was up sharply Friday on a strong shot of volume that moved back up to average. Looking for a breakout over the top of the recent high in the range.
Volume: 200.1K Avg Volume: 192.136K
BUY POINT: $61.35 Volume=288K Target=$73 Stop=$59.25
POSITION: BIO IL - Sept. $60c (58 delta) &/or Stock
http://www.investmenthouse.com/cs/bio.html
Play Date: 07/19/2003
COCO (Corinthian Colleges--$52.3; +1.78; optionable): Education and training. Forecast to announce a split on 8-27-03 in conjunction with earnings. The company has not confirmed this date but based upon our research this is the date for the release.
BACKGROUND: Last announced a 2 for 1 split on 4-25-02 in conjunction with earnings. The stock price was $53.25. The annual shareholder meeting was on 11-21-02 at which time no additional shares were authorized. The company has sufficient shares for a 2 for 1 split.
http://biz.yahoo.com/p/c/coco.html
STATUS: Flying plateau. COCO broke out of a 5 month base in April and rallied up the 50 day MVA since. It peaked out at 52 to start the month, and has moved laterally between 50 and 52 since as volume has fallen back below average. Accumulation was a solid 6 to 3 in the earlier base, setting up the foundation for this move. Friday COCO was up sharply toward a breakout from the pattern though volume was still below average. Money flow is strong and relative strength is breaking out. Now all we do is look for volume to do the same so we can enter.
Volume: 553.05K Avg Volume: 810.272K
BUY POINT: $52.95 Volume=1.2M Target=$63.65 Stop=$49.24
POSITION: UCS KJ - Nov. $50c (64 delta) &/or Stock
http://www.investmenthouse.com/cs/coco.html
Continuing Pre-Announcement Plays:
Play Date: 03/29/2003
AVP (Avon Products--$63.55; +0.48; optionable): Makeup. Forecast to announce a split 7-23-03 before the market opens in conjunction with earnings.
BACKGROUND: Last announced a 2 for 1 split on 7-22-98 in conjunction with earnings. The stock price was $43. The annual shareholder meeting is scheduled for 5-1-03 at 10:00 ET at which time no additional shares will be authorized. The company has sufficient shares for a 2 for 1 split.
http://biz.yahoo.com/p/a/avp.html
STATUS: Testing the 18 day MVA. AVP is making a deeper test toward support at 62 and the 50 day MVA (61.40), testing 62 on the intraday lows and rebounding as volume remained light. AVP has been a strong market leader, and it is now taking a breather that it needed after a strong run higher. May consolidate a bit more before making the next move. We will be patient and let it make the strong volume breakout.
Volume: 935.8K Avg Volume: 1.331M
BUY POINT: New: 64.55 (orig. $57.58) Volume=1.7M Target=New positions: 74.25 (orig. positions: $65.88) Stop=$62.25
POSITION: AVP JL - Oct. $60c (59 delta) &/or Stock
http://www.investmenthouse.com/cs/avp.html
Play Date: 05/29/2003
CECO (Career Education--$75.41; +2.2; optionable): Education and training. Forecast to announce a split on 7-22-03 after the close in conjunction with earnings.
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: Testing the 18 day MVA. Continuing its strong move, CECO tested the 18 day MVA (72.57) on the Thursday intraday low and then snapped back Friday with a solid point gain. Volume was not there, but as we have noted before, CECO often moves on light volume and then spurts higher on volume after the move has started. This was a very nice test of the move, and we are looking for more volume on a further move to enter more positions.
Volume: 460.938K Avg Volume: 839.599K
BUY POINT: $75.74 Volume=1.2M Target=$86.55 Stop=$72.75
POSITION: CUY JO - Oct. $75c (58 delta) &/or Stock
http://www.investmenthouse.com/cs/ceco.html
Play Date: 07/10/2003
COH (Coach--$52.65; -0.08; optionable): High-end handbags and related items. Forecast to announce a split on 7-29-03 before the open in conjunction with earnings. The company has not confirmed this date but based upon our research this is the date for the announcement.
BACKGROUND: Last announced a 2 for 1 split on 5-2-02 in conjunction with a board meeting. The stock price was $55.59. The annual shareholder meeting was on 11-6-02 at which time no additional shares were authorized. The company has sufficient shares for a 2 for 1 split.
http://biz.yahoo.com/p/c/coh.html
STATUS: Testing the breakout. Continues to test the strong move early in the month, holding at price support at 52.50 as well as the 18 day MVA (52.88). This is a very good technical spot for it to hold, and we are simply waiting for a volume bounce to enter. Money flow remains excellent as does relative strength.
Volume: 749.8K Avg Volume: 974.634K
BUY POINT: Aggressive: $54.25; Next: $55.55 Volume=1.4M Target=$65 Stop=$51.66
POSITION: COH BK - Nov. $55c (60 delta) &/or Stock
http://www.investmenthouse.com/cs/coh.html
End part 2 of 3
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