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us stock market, trade stock
Begin part 2 of 3
SUBSCRIBER QUESTIONS
Q: I have been watching several companies report earnings this week and many have not been well received. The problem is evident in HELE today, when it reported good earnings, revenue growth, and guided higher. While it all sounds good the revenues were not as high as the street expected and the stock was sold off. Could the market have set its growth expectations for the market as a whole to high for this quarter and be setting itself up for a disappointing earnings season.
A: Typically the eanings season works through a progression: first earnings, if they beat expectations, are rewarded. There is enthusiasm about growth, and the uncertainty leading into earnings unleashes some buying activity on the excitement. After the upside surprises become the norm then earnings are met with indifference (unless really blowout) and then are even sold on the news. Heading into earnings season the response to early earnings reports and guidance has been as mixed as the market action of late. HELE gets punished as you note, ADTN is up 9 sticks on raised guidance. We definitely have some concern approaching earnings. They will be better than expected, but if the market rallies up to September resistance and that overhead supply that showed itself Friday could act against stocks that have already built in some expectation of the improved earnings. If they come in at or just over expectations, they are at some risk. To us we are looking at what the indexes do at the September highs as that is proving to be the key point. Stocks will even drive through that or not, and earnings will have something to do with that.
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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.
THE PLAYS
Good movers Friday:
Best Plays:
1) BRCM: Making the breakout.
2) CHL: Volume is jumping as it moves toward a breakout.
3) DGIN: Rolling over on volume.
4) INSP: Starting back up from the test on volume.
5) PPHM: Nice test looks to be ending.
6) TWAV: Volume is edging higher. Looks ready.
NEW PLAYS:
Upside:
Play Date: 10/04/2003
BRCM (Broadcom--$28.79; +1.79; optionable): Semiconductor integrated circuits
http://biz.yahoo.com/p/b/brcm.html
STATUS: Cup w/handle. We saw BRCM Thursday and considered it for the report but decided to wait another session. The news Friday broke it higher with a big gap on strong, above average volume. That was a good compliment to the solid 4 to 2 accumulation in the base (4 up weeks on rising volume to 2 down weeks on rising volume). Even with the strong move it is well within the buy range on this move, having come back from the session high (29.20) to close, though still maintaining much of the gain. Solid action in the 12 week base, and looking for positions on a further move higher on this breakout.
Volume: 13.948M Avg Volume: 13.125M
BUY POINT: $29.25 Volume=20M Target=$35.12 Stop=$27.15
POSITION: RCQ AY - Jan. $27.50c (63 delta) &/or Stock
http://www.investmenthouse.com/ct/brcm.html
Play Date: 10/04/2003
CHL (China Mobile--$13.68; +0.24; optionable): Mobile telecom services on mainland China
http://biz.yahoo.com/p/c/chl.html
STATUS: Ascending triangle. CHL is workign toward the breakout from a 12 week base showing strong 3 to 1 accumulation. We like these patterns because the breakouts can be explosive as the stock is squeezed between a constant high in the pattern while the lows werok higher and higher. When it gives, it usually blasts off. This is part of a larger 12 month reverse head and shoulders pattern, a solid accumulation base. Volume was up to end last week as CHL gapped up toward the breakout point with trade surging Friday. Excellent money flow to go with the accumulation. CHL may back off from the late week move, maken another higher low near the 18 day MVA (13.23), and then give the breakout we are looking for.
Volume: 890.3K Avg Volume: 486.786K
BUY POINT: $13.87 Volume=730K Target=$16.65 Stop=$13.21
POSITION: CHL LV - Dec. $12.50c (89 delta) &/or Stock
http://www.investmenthouse.com/ct/chl.html
Play Date: 10/04/2003
HPOL (Harris Interactive--$8.34; +0.49; no options): Internet software & services
http://biz.yahoo.com/p/h/hpol.html
STATUS: Flat base breakout. HPOL made us some good money earlier this year, and it has now based out after that move and is starting to break higher. After running to 8, HPOL dropped into its 9 week flat base. It was just a breather, however, as accumulatio in the base is an outstanding 6 to 0. Volume surged to end the week as HPOL shot off of the 50 day MVA (7.15) and broke from the pattern Friday. Still a buy on this move, but after the strong week-ending surge we anticpate at test toward 8 and then a move back up. That is when we will move in. It may occur intraday Monday or take a session to come back, test, and then move higher the next session.
Volume: 701.863K Avg Volume: 445.567K
BUY POINT: $8.15 Volume=668K Target=$9.88 Stop=$7.48
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/hpol.html
Play Date: 10/04/2003
SCMR (Sycamore Networks--$4.91; +0.16; optionable): PC networking and communication
http://biz.yahoo.com/p/s/scmr.html
STATUS: Testing the breakout. A former high flier that crashed and burned ($200 in January 2000 to $2 in September 2002), SCMR has been slowly putting the pieces back together. It formed a 3 month cup base in June to September, broke out, and rallied to 5.50. That was an impressive percentage move. It will never approach 200 again, but it can make us some nice money without ever having to come close to that level. It is testing the breakout now, coming back and holding the 18 day MVA (4.77) more or less, working on mostly below average volume but showing nice volume spikes on upside sessions (e.g., last Monday and Friday). Money flow remains very strong as it does, a nice addition to the stellar 7 to 1 accumulation in the base. Looking for a volume move higher over 5 to enter.
Volume: 3.331M Avg Volume: 2.089M
BUY POINT: $5.12 Volume=3.1M Target=$6.41 Stop=$4.76
POSITION: SMZ AA - Jan. $5c (52 delta) &.or Stock
http://www.investmenthouse.com/ct/scmr.html
Downside:
Play Date: 10/04/2003
DGIN (Digital Insight--$20.05; -0.55; optionable): Consumer services
http://biz.yahoo.com/p/d/dgin.html
STATUS: Put. After peaking on a nice move through September, DGIN bounced off a 50 day MVA test, but then could not hold the move and plowed through the 50 day (21.35) two weeks back. A feeble move higher last week managed to get to the 10 day MVA (20.79), but after tapping at that level Friday it rolled over on a big volume spike. That shows the sellers jumped on it when it tried to make the move higher. Looking for it to fall further from here and deliver a nice downside gain.
Volume: 1.063M Avg Volume: 522.02K
BUY POINT: $19.85 Volume=783K Target=$17.85 Stop=$20.85
POSITION: UGU WD - Nov. $20p (-45 delta)
http://www.investmenthouse.com/ct/dgin.html
CONTINUING PLAYS:
Upside:
Play Date: 07/26/2003
EMBT (Embarcadero Technologies--$10.35; +0.42; optionable): Business software
http://biz.yahoo.com/p/e/embt.html
STATUS: Flat base. After a nice surge in late August that pushed it over 10, EMBT has spent over a month moving laterally in a tight range. It got a bit wild toward the end of September, dipping down to the 50 day MVA (9.36), but it quickly rebounded to hold the range. That action typically shakes out the weak holders and sets the stage for another break higher. Friday EMBT posted a nice gain on rising though slightly below average volume. Money flow continues to surge up ahead of the stock as it moves laterally, and with that divergene we are looking for EMBT to make the next break higher for the next entry point.
Volume: 201.183K Avg Volume: 252.961K
BUY POINT: New: $10.88 (orig. $9.33) Volume=400K Target=New positions: 13 (orig. positions: $11.12) Stop=$9.78
POSITION: MBQ KU - Nov. $7.50c (67 delta) &/or Stock
http://www.investmenthouse.com/ct/embt.html
Play Date: 09/06/2003
INSP (Infospace--$22.16; +1.16; optionable): Internet information provider
http://biz.yahoo.com/p/i/insp.html
STATUS: Test 18 day MVA. INSP has delivered a great move for us already, and after the August to September surge, it has come back to test and hold the 18 day MVA (20.49). The pullback to that level was on lower, below average volume. Friday INSP jumped off that level on rising though just below average volume. Strong stocks will periodically test the 18 day MVA on their runs higher. Money flow is strong and relative strength broke out on the late September run. Starting back up and a good point to move in once again.
Volume: 398.606K Avg Volume: 440.903K
BUY POINT: New: $22.32 (orig. $18) Volume=600K Target=New positions: $26.75 (orig. target: $21.55) Stop=$20.42
POSITION: IOU AX - Jan. $22.50c (54 delta) &/or Stock
http://www.investmenthouse.com/ct/insp.html
Play Date: 09/20/2003
MTCH (Metron Technology--$4.91; +0.11; no options): Chip equipment
http://biz.yahoo.com/p/m/mtch.html
STATUS: Ascending triangle. Up to the top of the pattern but on low volume. MTCH continues to work in a nice 6 week base sporting solid 4 to 0 accumulation. Volume left it as it approached the breakout late last week, so we anticipate it will make another test lower twoard the 18 day MVA (4.59) and then attempt the breakout. Strong money flow and relative strength. Just being patient. When these patterns break, they are usually explosive.
Volume: 26.6K Avg Volume: 94.925K
BUY POINT: New: $6.08 (orig. $4.78) Volume=127K Target=$5.98 Stop=$4.35
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/mtch.html
Play Date: 09/30/2003
MTIC (MTI Technology--$1.69; -0.04; no options): PC data storage devices
http://biz.yahoo.com/p/m/mtic.html
STATUS: MTIC broke out of a 5 month flat base in September, rallied to $2, and is now testing that move. For the past two weeks it has worked laterally over the 18 day MVA (1.64) on very low, below average volume. Accumulation is very strong at 5 to 2, and that shows institutions have bought into it. The low volume on the pullback and consolidation shows that few are selling it. Money flow continues to rally ahead of the price, and that often leads to the break higher by the stock as it follows the money. Want to see a clean, high volume break over 1.80
Volume: 59.3K Avg Volume: 166.491K
BUY POINT: $1.83 Volume=250K Target=$2.28 Stop=$1.58
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/mtic.html
Play Date: 09/20/2003
PPHM (Peregrine Pharma--$2.19; +0.06; no options): Biotechnology
http://biz.yahoo.com/p/p/pphm.html
STATUS: Testing the breakout. PPHM broke from its 4 month cup with handle base in September and has come back to test that break rather quickly. Volume on the pullback has been below average and PPHM held the 18 day MVA (2.03) as it made the test. Not bad action given the market was selling hard as PPHM made an orderly pullback to test the breakout. Strong money flow to match the solid 4 to 0 accumulation in the base. Looking for the next high volume move to move in for more positions.
Volume: 1.356M Avg Volume: 1.684M
BUY POINT: New: $2.28 Volume=2.5M Target=$2.95 Stop=$2.01
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/pphm.html
Play Date: 09/24/2003
RBK (Reebok--$35; +0.59; optionable): Footwear
http://biz.yahoo.com/p/r/rbk.html
STATUS: Double bottom w/handle. Gapped up for the breakout Friday, but went nowhere after the gap higher. Volume was higher but just average; not what you want to see on a breakout. The monve needs more volume. It is currently holding at the late August high. If it can make the break over that level on some strong volume it is a buy. Excellent 4 to 1 accumulation (4 up weeks on rising volume to 1 down week on rising volume) in its 11 week base along with outstanding money flow.
Volume: 748.2K Avg Volume: 744.656K
BUY POINT: New: $35.24 (orig. $34.46) Volume=1.1M Target=$41.35 Stop=$33.22
POSITION: RBK AG - Jan. $35c (50 delta) &/or Stock
http://www.investmenthouse.com/ct/rbk.html
Play Date: 10/02/2003
TWAV (Therma-Wave--$3.46; +0.1; no options): Scientific & technical instruments
http://biz.yahoo.com/p/t/twav.html
STATUS: Testing the breakout. Very nice action as TWAV holds the 10 day MVA (3.37) on the close in a very orderly test of the breakout from its 3 month cup with handle base in mid-September. Accumulation in the base is an outstanding 4 to 1 (4 up weeks on rising volume to 1 down week on rising volume). Money flow continues to rise even as the stock edges laterally and lower. Friday volume was up to average as TWAV again tested lower but reversed and rallied. Looks ready for the break higher again and we want to jump on it when it does.
Volume: 569.862K Avg Volume: 521.422K
BUY POINT: $3.65 Volume=600K Target=$4.75 Stop=$3.32
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/twav.html
Downside:
Play Date: 10/02/2003
AVY (Avery Dennison--$52.55; +0.15; optionable): Paper & paper products
http://biz.yahoo.com/p/a/avy.html
STATUS: Put. AVY plowed through the 50 day MVA (52.82) two weeks back and tumbled to 48. The past week it rebounded on lower though still strong volume. Thursday and Friday it showed dojis at the 50 day MVA. That typically indicates a stall at that level, but we want to see it roll over and volume spike up as it does.
Volume: 478.5K Avg Volume: 653.943K
BUY POINT: $52.04 Volume=1M Target=$49 Stop=$52.88
POSITION: AVY WK - Nov. $55p (-69 delta)
http://www.investmenthouse.com/ct/avy.html
Play Date: 10/01/2003
CYMI (Cymer--$42.06; +1.87; optionable): Chip equipment
http://biz.yahoo.com/p/c/cymi.html
STATUS: Put. CYMI gapped higher Friday as the market rallied, but volume was lower, and after a tap a the simple 50 day MVA on the high (43) it fell back to close just below the exponential 50 day (42.15). Resistance is not only from the 50 day MVA but there is also a rpcie high at 42.50 from July. CYMI bounced Friday, but the volume was lower; the conviction was not there. If it rolls over and volume rises even more, it is a downside play. We want to see the volume moving.
Volume: 1.903M Avg Volume: 1.467M
BUY POINT: Made the test of $42, now 41.72 on the way back down. From here: $40.94 Volume=2.1M Target=$36.75 Stop=$42.38
POSITION: CQG WI - Nov. 45p (-37 delta)
http://www.investmenthouse.com/ct/cymi.html
End part 2 of 3
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