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Begin Part 2 of 4

SUBSCRIBER QUESTIONS

Q: I've been trading for almost 10 years, and I had never heard of an
18 day moving average until I subscribed to you service. Is it a "trader's secret" or something? It just seems kind of odd when compared to the 10,50,and 200. Do you have any information about it?

A: We developed our system of looking at stock movements after reading and trying everything we could get our hands on and then holding onto what worked. We found that the 18 day exponential moving average is often a much more accurate indicator of shorter term support for stocks moving out of solid patterns than other moving averages. It is quite simply a case of trying many and focusing on the one that worked for us. These change over time depending upon market volatility and changing attitudes. That is why we always look at other MVA's to see if there is any change. Some stocks will adhere to the 20 day MVA more than the 18 day, but we find them to be the minority at this stage.

Q: What do you think the dangers are of a European economic slow down prolonging the US recovery of earnings for another year?

A: As we said last week, Europe feeds off of the U.S., not vice versa. We make our own wake over here and had to do it all during the 1990's. It won't help, but we were not expecting any help from Europe. Indeed, as we said over a year ago, as the U.S. goes, so goes the world. That is what is happening, and as we have seen and heard from companies recently, the U.S. is improving but Europe is just slowing down. We were not counting on Europe when we made our projection of a second half recovery, and we are not counting on Europe now.

Q: Could you please tell me what " team trades " mean? Are you all trading at the same time ? Do you send members emails to trade those?

A: Well, with all of the flooding, our trading has been taking a bit of a back seat of late as we here at the newsletters are working round the clock to get our households up and running when not preparing the reports. I have some buy stops in on some breakouts we are tracking and some split plays, but my off time right now is trying to get life back to normal.

To answer your question, Team Trades are trades we make on the plays that we have written about in the reports. The purpose is to show subscribers how we go about acting upon the plays that we have set up, i.e., what we look for, when we get in, what positions we take and at what points. It helps provide another tool to see how we utilize the information we prepare. The plays are very similar to the thought process (actually almost identical) that we go through in deciding if we want to make the trade.

Now, we are going to introduce another service very soon (in the next two weeks or so) for all of the reports that is an alert service that will notify you by email, pager, or cell phone when we see a breakout move or other move we are looking for and are ready to make the trade. It is going to give you the information we use to make the decision: the alert will be triggered at a price just below the pivot point or buy point so we have time to check the play again, it will provide the actual buy point where we would get in, the current volume, and what percent of average volume the current volume is. We will also include any comments we feel are important for the trade, if any. It is quite an undertaking to do this, but it is a service that many of you want, and it will easily pay for itself each month by getting you into the right trades at the right time without requiring you to watch the market at all times. Needless to say, we are very excited about this service.

For a review of frequently asked questions, please use the link below:

http://www.investmenthouse.com/1questions.htm

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THE PLAYS: A lot of stocks that could make solid moves from support.

PRE-ANNOUNCEMENT PLAYS FOR THIS WEEK: CHBS and FITB are forecast for Thursday.

NEW PRE-ANNOUNCEMENT PLAYS: 2 plays in GREAT patterns!

KG (King Pharmaceuticals--$53.82; +1.87; optionable): Forecast to announce a split on 6-22-01 in conjunction with its annual shareholder meeting.
http://biz.yahoo.com/p/k/kg.html
BACKGROUND: Last announced a 3 for 2 split on 6-2-00 in conjunction with a board meeting. The stock price was $54. The annual shareholder meeting is scheduled for 6-22-01 at 3:00 ET at which time no additional shares will be authorized. The company has sufficient shares for a 3 for 2 split.
STATUS: Made quite a climb in May and early June, rising up from the 42 range (200 day MVA) in the right side of a cup base formed since last December. It made a new high on the run at 56.26 before pulling back in a handle. The gradual, low volume pullback found support at 52 (18 day MVA is at 51.32), and Friday it made a nice move back up on volume near the average 1.07 million (average 1.09 million). A good start to a move that could take off with a split announcement. Relative strength is at its high, with excellent money flow.
BUY POINT: Aggressive momentum: A continued move up on increased volume. Breakout: 56.29 on volume of 1.5 million.
POSITION: Both buy points: Stock and/or October $50 calls to buy (KG JJ).

ATK (Alliant Techsystems--$98.14; +0.45; optionable): Forecast to announce a split on 8-7-01 in conjunction with its annual shareholder meeting.
http://biz.yahoo.com/p/a/atk.html
BACKGROUND: Last announced a 2:1 split on 11-2-00 in conjunction with earnings. The stock price was $89. The annual shareholder meeting is scheduled for 8-7-01 at 2:00 pm CT at which time additional shares will be authorized.
STATUS: Has made a strong, steady move since its last split in November, and since early May has been moving in a lateral consolidation between 95 and 101, right in split range. The stock has pulled back the last few days to its short-term MVA's (10 and 18 day at 98 and 97.49, respectively), pushing up slightly Friday on lower, light volume (129,500; average 183,600). ATK could again visit the 95 level (50 day at 94.14) before turning back up. Relative strength has broken out ahead of the stock (very bullish), and the stock shows good money flow.
BUY POINT: Aggressive: A move back up on increased volume after holding the 95 level on a pullback. Breakout: Over 102 on above average volume.
POSITION: Aggressive: Stock and/or August $90 calls to buy (ATK HR). Breakout: Stock and/or November $100 calls to buy (ATK KT).

BEST PLAYS: Besides the plays set forth below best plays, there are some other stocks that also look good. Many of them might not be plays tomorrow, but if they hold on will likely move if we get a better market. These include Pre-Announcements CHV and THQI; Pre-Splits MTON (a new play); Continuing Candidates KMP and MMM; and Post-Splits LH, WFMI and KKD.

PRE-ANNOUNCEMENT BEST PLAYS:
1) FITB - Looks ready to spring
2) FISV - Solid move back up in a great combination pattern
3) BMET - Doji on support.

FITB (Fifth Third Bancorp--$59.45; +0.05; optionable): Forecast to announce a split on 6-21-01 with a board meeting. Earnings are set to be announced 7-16-01 before the market open.
http://biz.yahoo.com/p/f/fitb.html
BACKGROUND: Last announced a 3:1 split on 6-20-00 at a stock price of $61. The annual shareholder meeting was on 3-20-01 at which time authorized shares were increased.
STATUS: Has developed a nice, tight, slightly descending consolidation as it tests its breakout from a cup with handle. Friday it showed another doji as it holds its 18 day MVA (59.05), and there was a very encouraging 'get ready' volume spike as well, skyrocketing to 3.97 million (average is 1.77 million). Looks like it could spring, giving us an excellent entry point going into the forecast announcement. Relative strength broke out ahead of price, a bullish sign, and the stock shows excellent relative strength and buying. We are targeting the 68-70 level for this one if we can get a breakout (high is 61.11) and a decent market.
BUY POINT: A move over 60.30 on continued strong volume. Stop: 56.07 or just below the 50 day MVA (56.91).
POSITION: Stock and/or August $55 calls to buy (FTQ HK).

FISV (Fiserv--$57.17; +1.45; optionable): We are working on a date.
http://biz.yahoo.com/p/f/fisv.html
BACKGROUND: Last announced a 3:2 split on 3-25-99 in conjunction with its annual shareholder meeting. The stock price was $52. FISV's last two splits were announced in conjunction with its annual shareholder meeting. The company currently has sufficient shares for a 2:1 split.
STATUS: FISV has been a bit volatile but has held strong over the support of its 18 day MVA (55.80) as it moves in an ascending wedge after having tested its breakout from a cup with handle (formed out of a large descending wedge). The ascending wedge formed on the top of the break of another bullish pattern is one of our favorites. Friday the stock touched back to 54.83 but surged up to close, and volume on the move up was higher and very solid at 1.87 million (average 1.46 million). It made the move we were looking for over 58, hitting 58.15 at its high, but could not hold it as it pulled back to close. Off of such a pullback we could see a test back to its 18 day MVA, but it is looking good (relative strength broke out Friday), and we will also watch for another push upward from here. If we get a solid move we are targeting the stock's high at 63 on an initial move.
BUY POINT: From here or after a test of support, a move over 58.15 on continued strong volume. Stop: Just below recent lows at 54 (50 day MVA at 53.80).
POSITION: Stock and/or September $55 calls to buy (FTQ IK).

BMET (Biomet--$45.09; -1.12; optionable): Medical equipment. Forecast to announce a split with a board meeting 6-29-01.
http://biz.yahoo.com/p/b/bmet.html
BACKGROUND: Last announced a 3:2 split on 7-6-00 at a stock price of $29. The annual shareholder meeting was on 9-16-00 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: After closing well of its Thursday high of 47.26, a topping sign, the stock gapped down Friday and stayed there. It closed with a doji right on recent support ot the 18 day MVA (44.95) as volume was slightly down but remained strong at 2.05 million (average 1.78 million). The stock is holding up well after having recently broken from a large ascending wedge, and after hitting up to an intraday high last week of 48.75 as it broke from a smaller ascending wedge, the stock is back in the range of that second pattern. Off of the doji on support we will see if BMET can make another move up.
BUY POINT: Aggressive: A bounce in a good market with continued strong volume. Stop: 41.85 (50 day at 42.94).
POSITION: Stock and/or October $40 calls to buy (BIQ JH).

PRE-SPLIT BEST PLAYS: Remember, we try to grab these as they break out of good patterns or as they start a run right before the split. Not looking for home runs, but looking for those $3 to $4 moves running into the split, watching for topping signs and potential resistance. Not huge money, but it can be very steady. We set our initial stops at the 7-8% range below the purchase price (or just below obvious support), and move them up on a move to preserve our profits.
1) LOW - Looking good
2) CAKE - One more day before the split
3) LNCR - A good pre-split move
4) ESRX - Relentless

LOW (Lowe's--$72.38; -0.55): Splits 2:1 on or about June 29.
http://biz.yahoo.com/p/l/low.html
STATUS: LOW is in a small ascending wedge, looking good as it rests a bit after a strong breakout move in May. It pulled back a bit the last couple of sessions, Friday closing on the support of its 10 day MVA. Looking for a move back up from this support and a breakout of the pattern. Relative strength is right at its high, and money flow is very strong.
BUY POINT: Over 74 on above average volume (3.16 million; Friday 2.18 million), with stock and/or July $70 calls to buy (LOW GN).

CAKE (Cheesecake Factory--$35.90; -0.14; optionable): Restaurant. Splits 3:2 effective 6-19-01.
http://biz.yahoo.com/p/c/cake.html
STATUS: Made a nice move the past week, but has eased back the last couple of sessions. It is still hugging its down trendline (connecting its November-February closing highs) and 50 day MVA (36.08), showing a second consecutive doji after tapping down to 35.30 at its low (high of 36.59. One more session before the split, so we will see if it can make a move off of these dojis on support. A possible quick play.
PLAY: A move over the 50 day, with stock and/or July or October $30 calls to buy (CFQ GF or CFQ JF).

LNCR (Lincare Holdings--$63.05; +1.05; optionable): Health Services. Splits 2:1 effective 6-25-01.
http://biz.yahoo.com/p/l/lncr.html
STATUS: Making a strong move back up after having gapped down to open Thursday's session at the 50 day MVA (57.44). Friday the stock tapped back to the 18 day MVA at its low of 60 before surging back up to close, moving on substantially lesser volume (527,000; average 595,300). Made a fine breakout move earlier in the month, and is now pushing back up toward the breakout high of 65.88. We will see if it hold the momentum. Relative strength has broken out and buying is good.
PLAY: A continued strong move, with stock and/or August $60 calls to buy (LQN HL).

ESRX (Express Scripts--$109.75; +1.99; optionable): Splits 2:1 effective on or about June 22.
http://biz.yahoo.com/p/e/esrx.html
STATUS: ESRX has made an outstanding run since its split announcement, and Friday continued the remarkable move that started up back below 85. Friday the stock gapped back down to strong recent support at the 10 day MVA (105.36), surging back up off of that level as volume supported the move (spiking up to 1.07 million; average 692,400). The move made another new high, and with the strength of this move we will continue to look at positions, protecting them with stops back below the 10 day MVA.
PLAY: A continued move on solid volume, with stock and/or August $105 calls to buy (XTQ HA).

CONTINUING CANDIDATE BEST PLAYS: Some puts in here.
1) NVDA - Strong pattern
2) MIKE - Trying to move out of its cup with handle
3) CECO - Nice pullback

NVDA (Nvidia--$95.05; +1.46; optionable): Semiconductor.
http://biz.yahoo.com/p/n/nvda.html
BACKGROUND: The company last announced 5-16-00 after the close with earnings. Price was at $94, but the stock rose $8.74 that day in anticipation.
STATUS: NVDA has pulled back and is testing the breakout from the ascending wedge formed in May. It tapped down near 90 (low of 90.78) at its low for the second consecutive session, managing to move up and again close on its up trendline (connecting March and May closing lows). The stock held up very well in a weak market earlier this week, and the overall pattern is very solid (it is now testing the breakout from its ascending wedge formed after breaking from a cup with handle). When the market turns back up strong we could really see this one take off. For now we will look at positions on a strong move up in a good market, looking at the high ahead at 100. Relative strength is at its high. Initial target on a new high (over 100): $107-110.
BUY POINT: Aggressive: A move up from here in a strong market move, with increased volume (up to 4.56 million Friday; average 5.57 million). Stop: 88.40. Breakout: over 100 on above average volume.
POSITION: Stock and/or September $90 calls to buy (RVU IR).

MIKE (Michaels Stores--$39.71; +1.20; optionable):
http://biz.yahoo.com/p/m/mike.html
BACKGROUND: Based upon our research it does not appear that MIKE has ever split its stock. The annual shareholder meeting was on 9-13-00 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: MIKE has formed another handle to its cup while testing a prior breakout, and Friday it made a move back up from support at its 18 day MVA (38.46). Volume was up on the move up but not outstanding, coming in at 150,600 (average 219,500). It has been strong, and is acting right in a good pattern, but we want some more volume. A strong signal from relative strength, which has broken out ahead of price. Target on breakout: 46.
BUY POINT: Aggressive: A move over 40 (high of 39.95 Friday) on increased volume. Stop: 37.20. Breakout: Over 40.62 on volume of 330,000. Stop: 37.78.
POSITION: Both buy points: Stock and/or September $35 calls to buy (IKQ IF).

CECO (Career Education--$54.00; +0.05; no options):
http://biz.yahoo.com/p/c/ceco.html
BACKGROUND: Last announced a 2 for 1 split on 8-1-00 in conjunction with earnings. The stock price was $57. The annual shareholder meeting is scheduled for 5-11-01 at 1:00 pm CDT at which time additional shares will be authorized. The company has sufficient shares for a 2 for 1 split without increasing authorized shares.
STATUS: Got another 50 day MVA bounce, making a great move up Wednesday, back over its 10 day MVA (53.19) and closing just below its high of 56.10. The stock has pulled back a bit since then, Friday showing a doji over the support of the 10 day as volume dropped back to 122,200 (average 275,200). A nice move, and the gentle pullback with the doji over support is solid. The stock shows excellent relative strength, with great money flow and buying. It has been on a steady move up along its 50 day MVA since breaking from a cup in late January. Target: On a break to a new high, the 60 range.
BUY POINT: Aggressive: A move up from here on increased volume near the average. Stop: 50.22 (50 day MVA at 50.61).
POSITION: Stock only.

POST-SPLIT BEST PLAYS:
1) BAX - Continued strength
2) JNJ - Broke out!

BAX (Baxter International--$50.55; +0.77; optionable): Health Services. Split 2:1 effective 5-30-01.
http://biz.yahoo.com/p/b/bax.html
STATUS: Has pulled back to test its breakout from an ascending wedge, dropping from a high of 51.10. It continued showing strength with its move Friday, running up from its 10 day MVA (49.74) with a strong surge in volume (up to 2.56 million; average is 1.55 million). Has been strong post-split, and looks like it is ready to give us some more, showing a good pattern and solid price/volume action. Relative strength broke over its recent high and is looking at its all-time high. If it moves over the breakout high we are looking at a possible target at 55-56.
PLAY: Over 51.10 on continued strong volume, with stock and/or August $45 calls to buy (BAX HI). Stop: Just below the 50 day MVA (47.87).

JNJ (Johnson&Johnson--$52.04; +1.13; optionable): Drugs. Split 2:1 June 12.
http://biz.yahoo.com/p/j/jnj.html
STATUS: After a solid pre-split move, the stock was poised to make a move after several dojis over its 10 day MVA (50.85), and made the move Friday. It broke over the high made on the pre-split move, running on very solid, increased volume of 10.4 million (average 5.4 million). Relative strength has blasted upward, with very strong money flow and buying, and we will look for a continuation of the move, targeting initially the 56-58 range.
PLAY: A continued move from here on continued strong volume, with stock and/or October $47.50 calls to buy (JNJ JW). Stop: 48.40 (50 day MVA at 48.98).

End Part 2 of 4

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