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stock watch, stock recommendation
Begin part 2 of 2
SUBSCRIBER QUESTIONS
Q: In a very volatile session [Wednesday] (the market seemed almost psychotic at times) as you describe it, both the VXN and the VIX went to or pretty close to new lows. I've read several explanations of what these indices measure, but on a day like today, one would think they should have increased. Can you explain them in ways that we can more clearly understand what drives change in them? Thanks.
A: Excellent question. Over the past few months we noted an increase in intraday volatility, particularly back in July and August when the market started to show some initial distribution after the strong run out of March. Even as the markets started showing this action, the volatiliy indexes continued to drift in their low ranges. Same thing happened to a certain extent on Wednesday.
While in theory the volatiliy indexes would pick up on this as they are derived from the volatility of an at the money, current expiration option on the SP100 (for the VIX) or Nasdaq 100 (for the VXN), the key to remember is overriding trend. That is what really impacts the volatility indexes. Nasdaq is still in an strong uptrend, and the intraday action Wednesday did nothing to change that trend. There was a lot of intraday 'noise' as the indexes moved up and down, but the overall trend was nowhere near threatened. This difference is something we pick up on long before the indexes would show it. That intraday volatility, however, is just an indication that a move is losing some steam. It is not a clear signal that there is going to be a selloff. It makes you cautious, but as we saw, the market can turn volatile intraday and still maintain its trend. It is another thing to factor in but not to make decisions on.
A lot of people are citing low volatility levels as measured by the volatility indexes as a reason to believe the market is going to sell off. That is one of the reasons the broker I talked about in the Tuesday report used as a reason to sell. As we have stated, volatility can remain low for long periods of time even as the market rallies higher and higher. Early 1998 and late 1999 are perfect examples of this as the market rallied sharply on low volatility. What you need to be looking for in these circumstances is not low volatility, but rapidly rising volatility even as the market moves higher. That is where that intraday volatility actually morphs into rising volatility on the volatility indices. When that happens there is real reason to be concerned and watch the price/volume action even more closely.
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Continuing plays that still look good: CATS
Good movers Thursday: BRKS; GEMS; NXG; ESPR
CONTINUING PLAY LIST:
LEGEND
DATE: date play first appeared on report.
PLAY: Denotes the type of pattern or play.
Upside play types: A Wedge=Ascending triangle/wedge; BO=Breakout; Cup=Cup base; Cup hdl=Cup w/handle; DB hdl=Double bottom w/handle; Dbl btm=Double bottom; Flat=Flat base; FlyPlat=Flying Plateau; Pennant=Pennant; Rv H&S=Reverse head & shoulders; Saucer=Saucer base; Test 18=Testing 18 day MVA; Test 50=Testing 50 day MVA; Test BO=Testing the breakout (could be 10 day MVA test, etc.)
Downside play types: CCall=Covered Call; DWedge=Descending triangle/wedge; Dbl Top=Double top; H&S=Head & shoulders; Put (generic downside);
PIVOT=Buy point
Tgt=Target stock price for the play. Applies to stock and options.
Vol=Volume for the most recent session.
TgtV=Target volume to enter the play.
Stop=Stop advisory point. This is advisory and we may or may not exit a play if it hits this level depending upon market conditions.
Stock Date Play Close +/- Pivot Tgt Vol TgtV Stop
^SOXX 10/25 Test 50 498.36 +2.13 463.17 492 1.2M 1.1M 479.98
Current. Continue to move up the 10 day MVA. Tapped 505.79 at the day's high, but gave it back.
AKAM 10/21 Cup hdl 8 +2.04 6.42 8 29M 2.4M 5.88
Buy Not Issued. Huge gap up on good earnings and soar higher on excellent volume surge. Stock gapped up out of our range so we could not enter the play. Will wait for a pull back to enter.
AMSWA 10/23 Test BO 6.43 -0.26 6.12 7.45 486K 150K 5.62
Current. More volatile with 6.98 at the high and 6.44 at the low. Pull back on much lower, but still strong volume. Managed to retain most of yesterday's great move. Still in uptrend.
AV 09/25 Flat 13.05 -0.25 11.38 13.65 4.4M 4.4M 12.55
Current. Thudded down to close below the 10 day MVA on higher, but below average volume.
BBA 10/29 Test BO 13.45 +0.15 13.76 16.45 522K 749K 12.76
Current. Gapped up at the open, but lost some of the gain on average volume. Stock continues to soar up the 10 day MVA.
BRKS 10/29 Cup 27.09 +1.13 27 32.38 1.8M 1.4M 24.74
Current. Tested the 10 day MVA and rallied as the stock moved up the 10 day MVA on very strong above average volume.
BRLI 10/20 Cup hdl 16.26 -1.39 13.45 16.22 913K 212K 14.32
Current. Gapped up at the open, but lost the gain and then some on strong volume surge. Tapped 15.17 at the low and rallied. Managed to retain a small portion of yesterday's gain. May test further.
CATS 10/27 Test BO 7.3 +0.2 6.88 8.38 88K 145K 6.52
Buy Not Issued. Tested the 10 day MVA and rallied on higher, but below average volume. Have not entered the play because volume was not there. Still could make a break out.
CELL 10/02 Test 18 26.22 -1.03 23.25 28 946K 1M 24.68
Current. Thudded down to close on the 10 day MVA on higher, but still average volume. Tested 18 day MVA and rallied. May test down further.
CELL 07/21 Cup hdl 26.22 -1.03 12.83 15.51 946K 225K 24.68
Current.
CHT 10/16 Cup hdl 15.97 +0.12 15.62 18.75 400K 1.1M 14.88
Buy Not Issued. Continue the low volume ascent of the 10 day MVA. Tapped 16.10 at the day's high, but gave it back. Have not entered the play, because the volume is not there.
CKSW 10/25 Test BO 3.1 +0.02 3.08 4.05 610K 300K 2.81
Buy Not Issued. Tested below the 10 day MVA and rallied on stronger above average volume. Begin to make a lateral move along the 10 day MVA.
CORI 10/27 Test BO 6.42 +0.41 6.25 7.85 1.2M 550K 5.81
Current. Bounced off the 10 day MVA and rallied on stronger above average volume. Tapped 6.89 at the day's high, but gave back the gain.
CVM 10/20 Test BO 1.36 -0.16 1.61 2.05 1.4M 900K 1.38
Exited. Exited the play as the stock tanked below the 18 day MVA on higher, above average volume.
CVM 09/29 Cup hdl 1.36 -0.16 1.17 1.56 1.4M 900K 1.38
Exited.
DCGN 09/20 Test BO 7.01 -0.2 4.32 5.38 1.4M 315K 5.96
Current. Huge gap up at the open, but gave it back and more on stronger above average volume. May test back further. Managed to retain Tuesday's move.
DJO 09/11 Cup 17.39 -0.06 14 16.45 32K 100K 15.46
Current. Gapped up at the open but then lost the gain on low volume. Still in uptrend.
DKS 10/13 Cup 46.84 -0.36 44.68 55.38 126K 603K 42.32
Current. Pull back on very low volume. Tapped 48 at the high, but gave it back and then some. Still in uptrend and moving up the 10 day MVA
ECIL 10/02 Test BO 4.85 0 4.3 5.22 148K 300K 4.42
Current. Continue to move up the 10 day MVA on low volume.
EGOV 10/07 Test BO 5.07 -0.16 5.07 6.35 328K 264K 4.96
Current. Thudded down to close below the 10 day MVA on higher, above average volume. Tested below the 18 day MVA and rallied. Still in the pattern.
EGOV 09/20 Cup hdl 5.07 -0.16 4.8 5.68 328K 264K 4.96
Current.
EMBT 10/06 Flat 12.67 +0.12 11.24 13.38 298K 350K 11.66
Current. Continue to move up the 10 day MVA on above average volume.
EMBT 07/26 Cup hdl 12.67 +0.12 9.33 11.12 298K 400K 11.66
Current.
ENMD 09/17 Cup 4.97 -0.04 5.39 6.72 386K 890K 4.86
Current. Continue to move laterally along the 18 day MVA on below average volume.
ESPR 10/23 BO 24.79 +0.8 23.05 27.92 620K 600K 21.44
Current. Continue to move up the 10 day MVA on above average volume.
EVCI 10/20 Cup hdl 3.96 -0.19 3.4 4.38 121K 125K 3.21
Current. Thudded down on higher, but average volume. Managed to retain some of Tuesday's great gain. May test further.
GBN 10/22 Cup 1.86 -0.01 1.86 2.42 560K 300K 1.68
Current. Pull back on much lower, but still above average volume. Managed to retain all of last Friday's great move. May further test the breakout.
GEMS 10/22 Test BO 2.96 +0.21 2.87 3.72 1.1M 487K 2.61
Current. After testing the breakout the stock broke out again on strong volume surge for a great move. However did tap 3.05 at the day's high, but could not hold the gain. Beginning to move up the 10 day MVA.
GIGM 10/01 Cup hdl 3 -0.11 3.12 4.05 1.8M 2.7M 2.74
Current. Pull back to close slightly above the 10 day MVA on much lower, but still above average volume. Still in uptrend.
GNSC 10/09 Test BO 3.1 +0.36 2.65 3.47 581K 175K 2.43
Current. Huge gap up at the open on strong volume surge. Filled in the gap intraday. Continuing to race up the 10 day MVA.
IFLO 09/22 Test BO 14.34 +0.68 11.29 13.55 294K 375K 11.84
Current. Continue to move up the 10 day MVA for a nice gain on below average volume.
IFLO 09/09 Flat 14.34 +0.68 9.62 11.52 294K 426K 11.84
Current.
ILXO 10/28 Dbl btm 20.79 -0.28 21.42 25.75 303K 692K 19.72
Buy Not Issued. Pull back on below average volume. Still in uptrend.
JADE 10/16 Cup hdl 4.16 -0.18 5.04 6.32 110K 235K 4.45
Buy Not Hit. Gapped up at the open then thudded down to close just above the 50 day MVA on higher, but average volume. Tested the 50 day MVA and rallied. Will let it test the 50 day MVA and see if it rebounds.
KOSP 10/29 Cup 39.59 -0.21 40.25 48.32 478K 727K 37.28
Buy Not Issued. Tapped 39.59 at the low and rallied on much lower, but still above average volume. Managed to retain a majority of yesterday's gain. Still in uptrend.
LENS 10/29 A Wedge 13.35 +0.15 13.17 15.78 1.3M 750K 12.18
Current. Tapped 14, but gave back the gain on strong volume. Continue to move up the 10 day MVA.
LM 05/06 Cup hdl 82.37 -1.26 58.5 67.78 942K 610K 76.38
Current. Gapped up at the open and gave back the gain and more on very strong volume. Managed to retain Wednesday's move. May come back to test the breakout.
LOUD 10/23 Flat 2.6 -0.03 2.75 3.78 1.5M 3.6M 2.38
Current. Gapped up and then lost the gain on average volume. Still in the pattern.
NCI 10/25 Cup hdl 16.58 -0.65 15.41 18.55 572K 559K 14.21
Buy Not Issued. Pull back on higher, above average volume. Tapped 16.05 at the low and rallied. Still in uptrend, but could further test the breakout.
NEXM 10/14 Cup hdl 4.98 -0.01 5.03 6.28 156K 292K 4.68
Current. Beginning to make a lateral move on the 10 day MVA on very low volume.
NOOF 10/25 Cup hdl 4.77 +0.11 4.78 6.21 47K 280K 4.42
Current. Gapped up at the open but gave back most of the move on very low volume. Still moving up the 10 day MVA.
NTES 10/24 Test 50 45.6 -5.04 64.25 75 11M 5M 60.45
Exited. Exited the play as the stock tanked on strong volume.
NVLS 10/28 Test 50 40.63 +0.25 39.84 47.75 6.9M 9.5M 37.72
Current. More volatile session with 41.65 at the high and 40.17 at the low as stock continues to move up the 10 day MVA on higher, but still below average volume. Resistance is at 40.85.
NXG 10/15 Cup 2.05 +0.1 1.89 2.48 1.9M 684K 1.78
Current. Broke out on strong volume surge for a nice gain. Tapped 2.14 at the high, but disappointingly gave it back.
NXTL 10/02 Cup hdl 24.11 +0.07 20.76 24.95 20M 27M 21.48
Current. Continue to move up the 10 day MVA on slightly higher, but above average volume.
NXTL 09/17 Cup hdl 24.11 +0.07 20.64 24.75 20M 24M 21.48
Current.
OLGC 10/18 Test BO 7.33 -0.52 7.15 8.58 411K 342K 6.65
Current. Gapped up at the open, but then thudded down to close just above the 10 day MVA on higher, above average volume. Managed to retain a small portion of Monday's move. May further test the 10 day MVA.
ONNN 10/28 Test 50 4.44 -0.52 4.65 5.88 4.9M 1.7M 4.42
Current. Gapped down to close under the 18 day MVA on stronger above average volume. Tested below the 50 day MVA and rallied. Needs to hold here.
OPSW 10/28 A Wedge 8.6 +0.01 8.88 10.72 933K 1M 8.17
Buy Not Issued. Continue to move up the 10 day MVA on slightly below average volume.
ORBK 10/14 DB hdl 24.49 +0.39 24.31 29 287K 200K 22.89
Current. Continue to move up the 10 day MVA on strong volume surge.
PDYN 09/29 DB hdl 3.31 -0.02 2.55 3.24 57K 450K 3.15
Current. Continue low volume lateral move along the 10 day MVA.
PKI 10/09 DB hdl 18.08 +0.08 17.18 20.65 821K 1.1M 16.21
Buy Not Issued. Beginning to make a lateral move above the 10 day MVA on higher, above average volume.
PUMA 10/27 A Wedge 6.74 -0.01 6.78 8.48 2.3M 1.4M 6.18
Buy Not Issued. Gapped up at the open then went up to tap 7.25 at the day's high, but gave it all back on stronger volume. Still in uptrend.
QLGC 10/14 Rv H&S 56.19 -0.67 52.88 63.38 4.8M 7M 51.32
Current. Big gap up at the open, but gave it all back and then some on lower, but still above average volume. Managed to retain all of Tuesday's great move. Still moving up the 10 day MVA.
RETK 10/06 A Wedge 10.17 -0.02 8.49 10.25 771K 776K 9.34
Current. Gapped up at the open, but lost the gain on above average volume. Beginning to make a lateral move above the 10 day MVA.
SINA 10/24 Test 50 40.34 -1.16 41.55 50 11M 15M 39.42
Current.
SINA 09/09 Cup 40.34 -1.16 36.15 41 11M 12M 39.42
Current. Gapped up at the open and thudded down to close on the 18 day MVA on average volume. Testing the breakout.
SINA 08/18 Test 50 40.34 -1.16 32.2 38.25 11M 10M 39.42
Current.
SOFO 10/02 Test BO 2.44 +0.21 2.05 2.74 1M 395K 2.11
Current. Tested below the 10 day MVA and rallied for a great move on much stronger volume surtge. Beginning to move back up the 10 day MVA.
SOHU 10/24 Dbl btm 35.74 -0.43 37.69 45 6.3M 9M 34.85
Current. Gapped up at the open, but thudded to hold the 10 day MVA on above average volume. Tested the simple 50 day MVA and rallied. Still in the pattern.
TARO 10/08 Cup hdl 63.72 -1.23 61.51 73 600K 501K 61.32
Current. More volatile session on 66.24 at the high and 61.50 at the low (below the 18 day MVA).Thudded down to close above the 10 day MVA on very strong volume surge. Still in good shape.
TELM 09/30 Test BO 1.67 -0.03 1.51 2.04 2.2M 7M 1.48
Current. Gapped up at the open, but gave it back and then some. Tested the 10 day MVA and rallied on below average volume. Still moving up the 10 day MVA.
TLGD 10/22 Put 15.62 +0.57 14.98 13 177K 200K 15.82
Buy Not Issued. Testing up a little high to close on the 200 day MVA on stronger volume. Will give it some more time and let test a bit more.
TSCO 06/03 Rv H&S 41.46 -1.79 23.42 27.62 693K 603K 37.96
Current. Gapped up at the open, but gave it back and more to hold just above the 10 day MVA on stronger above average volume. May test back a little further.
TSCO 04/24 Cup hdl 41.46 -1.79 21.88 26 693K 603K 37.96
Current.
TUTS 10/29 A Wedge 5.5 -0.56 6.28 7.72 350K 175K 5.84
Buy Not Hit. Gapped down and thudded to close below the 18 day MVA on strong above average volume. Needs to hold here.
TXN 10/23 Test BO 29.52 +0.34 27.65 33.18 12M 18M 25.68
Current. Volatile session with 30.49 at the high and 29.17 at the low showing a doji on below average volume. Stock continues to climb the 10 day MVA.
VAR 10/28 Cup hdl 65.49 +0.29 64.5 74.25 1.1M 1.1M 60.94
Current. Tapped 67, but gave back the gain showing a tight doji on lower, but still above average volume. Continuing to move up the 10 day MVA.
ZMH 08/09 Test BO 62.73 -0.23 51.12 59.55 2M 3M 58.94
Current. Pull back on higher, but average volume. Still in uptrend.
Good Investing!
Jon L. Johnson and your IH Alerts 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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