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Begin Part 2 of 2
TEAM TRADES
Friday we saw some action in some of our plays from Thursday, and we were getting in when the presented the opportunity.
AMGN: We were in the middle of the Friday Stock Splits seminar when the eSignal alert for AMGN went off. We were heading to a break, so we pulled up the volume, a bit light, but we like the pattern the biotechs were forming. We made a decision to take a partial position as volume was not huge and then see if we got more volume this week to complete the position. That is one method we use when buying into breakouts. We can always add to a position if it continues to perform as we want it to do. The stock hit the breakout over 67.62, and we picked up some shares right at that price. The stock ran up on two apparent market orders (68.80) and then came back to test the move; that is when we took the positions. It closed the session at 68.58 on below average volume. We are looking for more positions if the stock continues to move.
SCMR: A rolling covered call play we were looking at, SCMR jumped out of the gates and ran to 10.95 in the first half hour, but then came back to test the move, dropping back to 10.60. It started back up and we moved in with stock positions at that point. Our goal was to pick up the stock and let it strengthen up to the 12 to 12.50 level and then sell the June $10 calls on it. The stock closed close to its high, but right below the 50 day MVA at 12.31. Monday we are going to see if it can reach the 50 day MVA, and if it starts to fall, we will sell the June $10 calls. We expect them to be right at 2.44 at that point.
For a review of frequently asked questions, please use the link below:
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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.
All prices reflect prices at the close on Friday.
BEST PLAYS: Some great plays on the report this weekend, and some of the cup with handles we waited on patiently last week are making moves. That can be key to making money on those and other stocks: while we are seeing stocks making quick moves, many more are taking longer to form patterns. The idea is that those will be solid patterns to produce good breakouts.
Best Plays:
1) FITB: Still a buy.
2) UTX: A low-volume test of the breakout.
3) SDS: A solid move up.
4) BVF: Looking for a breakout.
5) HET: Another imminent breakout.
6) WTSLA: Ready to break out.
7) BLPG: Making a move up in the handle.
READY TO BREAK TO A NEW HIGH (or just did):
New Play:
BMET (Biomet--$45.36; +0.69): Health services
http://biz.yahoo.com/p/b/bmet.html
STATUS: Trying to form a second ascending wedge after the breakout of its larger wedge two weeks ago as it moves above the 10 and 18 day MVAs. The stock pulled off the high of 45.65 to show a very tight doji, coming off a test of the 10 day at 44.44. Volume was slightly higher at 1 million (avg. 1.8 million). Looking for a breakout over the pattern's high at 46. The stock is consolidating after a run off the 50 day MVA earlier in May. Target: $52.
BUY POINT: 46.13, on volume in the 2.4 million range. Stop: 42.90.
POSITION: Stock and/or July $40 calls to buy (BIQ GH).
BREAKOUTS:
Continued Play:
FITB (Fifth Third Bancorp--$59.46; +0.59; optionable (FTQ):
http://biz.yahoo.com/p/f/fitb.html
STATUS: Covered on the 5-29 update report. The stock made a move up in its handle (to the 5-month cup base) on solid, above average volume (2.1 million; avg. 1.7 million), beating our buy point of 59.36. That constitutes a breakout, so look for stronger volume to sustain the move. Money flow is huge into the stock, and relative strength has moved out ahead of price. Target: $65-68.
BUY POINT: Remains a buy on the breakout up to 62.33. Stop: 55.30 (below the 10 day MVA at 55.43).
POSITION: Stock and/or August $55 calls to buy (FTQ HK).
TESTS OF THE BREAKOUT: Some of these stocks are moving back on low volume to test the breakout. We often take profits on option plays when they start to pullback on the breakout move and then get back in when the stock bounces up off of the breakout point. This second move is where some of the biggest gains are made.
New Play:
UTX (United Technologies--$83.17; -0.14; optionable (UTX): Conglomerates
http://biz.yahoo.com/p/u/utx.html
STATUS: Testing the recent breakout and holding at support (10 day MVA) for the second day (and Monday and Tuesday, excepting Wednesday when the stock broke down to test 82). Volume remains below average and was back down to 1.1 million (avg. 2.1 million). The stock again tested 82 both Thursday and Friday. Looking for a strong move back up. Target: $91.
BUY POINT: From here on volume in the 1.5 million range and better. Stop: 77.35.
POSITION: Stock and/or August $75 calls to buy (UTX HO).
Continued Plays: KOSP and MSCC are on a watchlist.
SDS (Sungard Data--$61.98; +2.50; optionable (SDS): Software
http://biz.yahoo.com/p/s/sds.html
STATUS: Making a nice move on a volume surge (735,500; avg. 893,000) from support, the 18 day MVA (59.36) where the stock had held for the week. SDS broke out of a short cup with handle and after hitting a high at 64.50, pulled back to test the buy point. Looking for a move over 63, earlier noted resistance. The stock will split June 18. Target: $71-74.
BUY POINT: Aggressive: Over 63 on volume of 993,000 or better. Stop: 58.59 (18 day MVA, 59.36).
POSITION: Stock and/or July $55 calls to buy (SDS GK).
WEDGES, PENNANTS, and FLYING PLATEAUS (AND FLAGS): These are some of our favorite patterns as the moves can be explosive. In this market, however, we need to see the move on the breakout on strong volume.
Back on the report:
BVF (Biovail--$40.08; +0.95; optionable (BVF): Drugs
http://biz.yahoo.com/p/b/bvf.html
STATUS: Making a good move up supported by strong volume (1.5 million; avg. 876,000). The stock tried this back in May but didn't have the volume, but that looks different now. The ascending wedge formed in the middle of the right side of a 3-month base. Looks good. Target: $45-47.
BUY POINT: 41.03, on continued strong volume (min. breakout volume was 1.2 million). Stop: At or just below the 50 day MVA (38.16). Remains a buy on a breakout up to 43.08.
POSITION: Stock and/or July $35 calls to buy (BVF GG).
New Plays:
HET (Harrah's Entertainment--$36.93; +0.36; optionable (HET): Leisure
http://biz.yahoo.com/p/h/het.html
STATUS: Showing stronger volume (724,500; avg. 773,045) on a move to upper resistance in the ascending wedge pattern (previously at 35.95, but the stock hit 35.96 on the intraday high). The pattern formed as a test of the recent strong breakout, and we're looking for another here. The stock shows solid money flow and buying. Target: $40-42.
BUY POINT: 36.09, on volume of 1 million or better. Stop: 33.56 (50 day MVA, 34.03). A buy on the breakout up to 37.89.
POSITION: Stock and/or August $32.50 calls to buy (HET HZ).
DFXI (Direct Focus--$34.53; +1.16; optionable (DQF): Consumer durables
http://biz.yahoo.com/p/d/dfxi.html
STATUS: Broke out of a cup pattern at the end of April but sold off pretty fast and tested the 50 day MVA mid-May. That was the first dip in the ascending wedge pattern
that formed to test the breakout. Got strong volume the last two days, and moved up to test resistance at the top of the pattern (35.55), pulling a point off the high Friday (volume was high at 611,200; avg. 219,000). We'll see if it breaks out here, or pulls back to continue the consolidation. Target: $46-48. Relative strength has broken out ahead of price.
BUY POINT: 35.68, on continued strong volume. Stop: 33.18 (or at the 10 day MVA, 32.75).
POSITION: Stock and/or July $35 calls to buy (DQF GG).
Continued Plays: MRCY; PVTL dropped out of the wedge but is in a good shakeout. We're keeping it on watch.
HB (Hillenbrand--$51.43; -0.14; optionable (HB): Diversified services
http://biz.yahoo.com/p/h/hb.html
STATUS: Is actually looking more like a pennant since the stock couldn't close near upper resistance (just over 52) in the ascending wedge. It is still holding above support (10 day MVA), but on the strong volume Friday (150,900; avg. 124,045) if it doesn't hold there we may get a test of the 18 day MVA (51.03). That would still keep it nicely in the pattern. Target: $58-61 on a breakout.
BUY POINT: 52.83, on volume of 168,000 or better. Stop: 49.13 (below the 50 day MVA at 50.09).
POSITION: Stock and/or September $45 calls to buy (HB II; low open interests).
BASING/TRADING RANGES: Lots of stocks pulling back to support. Make sure of the breakout (watch volumes) and then set stops just below the pivot point. Follow gains up with trailing stops.
News Plays:
BORL (Borland--$10.64; +1.02; optionable (BLQ): Application Software
http://biz.yahoo.com/p/b/borl.html
STATUS: Making a move up in its handle (the stock is in a 4-month cup with handle base) after testing the 50 day MVA (9.25) on a drop out of the handle earlier in the week. Volume was up to 942,500 (avg. 735,000), that popped price back over a good bit of overhead supply. Look for the breakout over 11.50, upper resistance in the handle. The stock shows big money flow. Target: $13-14.
BUY POINT: 11.63, on volume of 1.1 million or better (almost there). Stop: 10.82 (18 day MVA is at 9.95). Remains a buy on the breakout up to 12.21.
POSITION: Stock and/or July $7.50 calls to buy (BLQ GU).
WCNX (Waste Connections--$30.74; +0.88; optionable (NBU): Materials & constr
http://biz.yahoo.com/p/w/wcnx.html
STATUS: The stock broke out over resistance at the top of a very tight ascending wedge pattern, formed above the 50 day MVA (29.20) after a correction back to the 200 day MVA (26 at that time) in a 5-month base. Volume was tidily up at 634,900 (avg. 295,000) on the breakout, as the stock remains a buy (pivot point is 30.21). Money flow is solid and uptrending on this move up in the base. Target: $33 (initial highs in the base).
BUY POINT: A buy on the breakout up to 31.72. Stop: 28.59 (50 day MVA, 29.20).
POSITION: Stock and/or July $30 calls to buy (NBU GF).
SRNA (Serena--$27.26; +1.10; optionable (NHU): Software
http://biz.yahoo.com/p/s/srna.html
STATUS: In a cup with handle base of 4 months, and just coming off the base of the handle (support at 18 day MVA, 25.08, and the 10 day MVA, tested on the low of 26.52 Friday). Volume was stronger at 806,600 (avg. 611,409) as the stock closed showing a tight doji on the move up, which in this case is bullish. Look for a breakout from the pattern over the 200 day MVA is at 30.99 (handle high is 30.23). Target: $34-36.
BUY POINT: 31.12, on volume of 917,000 or better. Stop: 28.94.
POSITION: Stock and/or August $25 calls to buy (NHU HE).
WTSLA (WetSeal--$36.00; +0.95; no options): Retail
http://biz.yahoo.com/p/w/wtsla.html
STATUS: In a cup with handle of 14 weeks, and moving up toward upper resistance in the handle on good volume Friday (286,800; avg. 194,545). Look for a breakout over 36.45; the stock has almost reached minimum breakout volume already. Money flow is strong and buying looks good. Target: $40-42.
BUY POINT: 36.58, on volume of 292,000 or better. Stop: 34.02 (below the 10 day MVA at 34.32). Remains a buy on the breakout up to 38.41.
POSITION: Stock.
DMRC (Digimarc--$18.06; +0.45; optionable (DQT): Software
http://biz.yahoo.com/p/d/dmrc.html
STATUS: In the handle of a 8-month saucer with handle base, and was up Friday off of another test of its 50 day MVA (16.69), its third in the last three days, and the second overall test since mid-May. The stock closed right on support (10 and 18 day MVAs) on the bounce as volume shot up to huge levels (1 million; avg. 88,227). On that kind of volume, we are looking for a blast up from here. Handle high is 22.75. Money flow is outstanding and buying strong.
BUY POINT: Aggressive: Up from here on continued strong volume. Stop: 16.80 (or at or near the 50 day MVA at 16.69). Breakout: 21.94, on minimum volume of 132,000.
Stop: 20.40.
POSITION: Stock and/or August $15 calls to buy (DQT HC; low open interests). Breakout: Stock and/or August $20 calls to buy (DQT HD).
Continued Plays: Keeping PSFT, MIL, IRM (for another test of support), and HD on a watchlist.
PRGN (Peregrine--$20.95; -0.05; optionable (GQP): Diversified services
http://biz.yahoo.com/p/p/prgn.html
STATUS: In a 5-month cup with handle base and now in the handle as volume drops lower below average (1.9 million; avg. 3.1 million). The stock is holding support above the 10 day MVA (28.92), closing above that after testing the 18 day MVA on the low of 28.45. We are looking for a breakout over the high of 33.25. The stock shows great money flow and good buying. Target: $37-38.
BUY POINT: 33.38, on volume of 4.6 million or better. Stop: 31.04.
POSITION: Stock and/or July $27.50 or $30 calls to buy (GQP GY or GF).
HGSI (Human Genome--$69.25; +2.90; optionable (HHA): Drug
http://biz.yahoo.com/p/h/hgsi.html
STATUS: Up from support at the base of its handle (the stock is in a 5.5-month cup with handle base that is inside a larger base), the 18 day MVA, tested the last three days and Friday on the low of 66.07. Volume was higher Wednesday when the stock saw some mild profit-taking, but volume never got above average and was down Friday at 2.5 million (avg. 3.2 million). Looking for stronger volume to sustain the move up to breakout. Target: $82-85.
BUY POINT: Aggressive: Over 71 on rising volume. Stop: 66.03 (18 day MVA, 65.51). Breakout: 74.25, on volume of 4.8 million or better. Stop: 69.05.
POSITION: Aggressive: Stock and/or July $60 calls to buy (HHA GL). Breakout: Stock and/or July $65 or $70 calls to buy (HHA GM or GN).
RE (Everest Re--$67.50; -0.40; optionable (RE): Insurance
http://biz.yahoo.com/p/r/re.html
STATUS: Tried to break out of the wedging-type pattern in its 5-month base last week, but volume dropped off and Friday the stock was back testing the 10 day MVA on the low of 67.30. The previous correction in this pattern was to the 18 day MVA, and if RE doesn't stop at the 10 day (67.04 range) we will look for a bounce back from the lower support (66.52). Still holding up well. Initial target on a move over 69.30 (April high): $76-80.
BUY POINT: Aggressive: Up from 66.52 range (18 day) or better, on average or better volume. Stop: 61.86.
POSITION: Stock and/or July $65 calls to buy (RE GM).
BLPG (Boron Lepore--$13.71; +0.30; no options): Diversified services
http://biz.yahoo.com/p/b/blpg.html
STATUS: Making a good move up from the 10 day MVA, support at the base of its handle (13.40) in the cup base. Volume was higher at 138,900, well above average (88,636). Looking for the breakout here. Huge money flow and buying here. Target:
$16-17.
BUY POINT: 14.01, on volume of 133,000 or better. Stop: 13.03 (below the 10 day MVA at 13.39; 18 day at 13.15). Remains a buy on the breakout up to 14.71.
POSITION: Stock.
WFMI (Whole Foods--$57.16; -0.11; optionable (FMQ): Retail
http://biz.yahoo.com/p/w/wfmi.html
STATUS: Splits June 5, and the stock is holding up in the handle to the 5-month cup base (the split can influence toward the breakout). Volume was just lower (494,900; avg. 537,000) but the stock held in a tight doji near Thursday's closing price. May see a retest of the 10 day MVA (56.22) ahead of a breakout, but we are still looking for that. The stock shows good money flow and buying. Target: $65-68.
BUY POINT: Breakout: 58.96, on volume of 806,000 or better. Stop: 54.83 (just above the 18 day MVA, 54.66). A buy on a breakout up to 61.91.
POSITION: Breakout: Stock and/or August $50 or $55 calls to buy (FMQ HJ or HK).
LTBG (Lightbridge--$16.02; +0.55; optionable (LKQ): Telecom
http://biz.yahoo.com/p/l/ltbg.html
STATUS: Making a good move up from the base of its handle, on higher volume of 229,200 (avg. 282,000). The stock is near upper resistance as we look for the breakout (16.25). Shows huge money flow and good buying, and relative strength has broken out ahead of price, which is a bullish indicator. Target: $18-19.
BUY POINT: Breakout: 16.38, on volume of 423,000 or better. Stop: 15.23 (10 day MVA is at 15.09). Remains a buy on the breakout up to 17.20.
POSITION: Stock and/or July $12.50 calls to buy (LKQ GV).
DGX (Quest Diagnostics--$66.20; +4.39; optionable (DGX): Health services
http://biz.yahoo.com/p/d/dgx.html
STATUS: The stock split Friday, and responded nicely by popping up on above average volume (743,800; avg. 364,000). The stock is approaching resistance at the May high of 66.75, so watch that level if taking positions from here. Money flow looks great, and so does buying. Target: $74-77. We have to watch for some possible post-split slumping, but it is moving well.
BUY POINT: Aggressive: Up from here on continued strong volume. Stop: 61.57 (18 day MVA, 60.96).
POSITION: Stock and/or August $65 calls to buy (DGX HM). Please check with your broker Monday for options and deltas on this stock.
UNFI (United Natural Foods--$17.23; -0.33; no options): Food Wholesale
http://biz.yahoo.com/p/u/unfi.html
STATUS: The stock is in a double handle (that is losing its orderly nature) and began testing a bit deeper than the 18 day MVA (16.98) as it dropped to a low of 16.73 Friday, (16.35 on Wednesday). However, it is currently holding at the 10 day MVA, and if we do get another test of the 18 day, we will look for a bounce back up. Still looks decent in the cup with handle. Volume was higher Friday at 162,900 (avg. 144,000) as the stock opened higher (17.68) then sold back a bit. Target on a breakout: $21-22.
BUY POINT: 18.25, on volume of 201,000 or better. Stop: 16.97 (or at or near the 18 day MVA at 16.88).
POSITION: Stock.
Good Investing!
Your Technical Traders Report Team
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 in 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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