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Begin Part 2 of 2
Q: If one buys a stock at $30.90 then it drops to $30.00, goes to $31.00, goes to $29.00, to $31.38, to $30.50, but does not advance much over the purchase price, or just stays a bit below it. For how long does one hang on to such a frustrating stock, after all the indicators said it was a good buy? 2 days, 2 weeks?
A: If the play is a breakout play from a solid pattern but then just hems and haws and goes nowhere, we will consider exiting the play. After all, we were looking for a strong breakout move, and if the move stalls out in a hurry without making a decent advance, it may not have the interest from the institutions to make a strong move. In that case, we exit the play more often than not and look for better game while keeping an eye on a stock that still looks good but just may not be ready. Many times the overall market has something to do with that: a stock looks great, starts to make a move, but the market is topping near term or otherwise softening, and that stops the move for awhile. Many, many times we will see a stock start to move up in its pattern and the market decides to take a breather and the stock does the same. Then it bounds on out of the base when the market has its next good session. If the stock is still good, and if you would buy it again, then we will stay. If it has not made the move we want and we would not buy into the pattern at that point, we will get out.
TEAM TRADES
TUTR: This education stock started out again like a ball of fire Friday, but it was just flying early on, gapping higher and higher up over 29. We decided it could not hang on at that pace and decided to wait for a test of the breakout. We but in a limit order at 27.95, breakout point, in an attempt to pick it off if it tested the breakout. Well, it just shot higher, but then it did start to fall all through the session. We saw it start to move up with just over an hour to go, but then rolled over and started falling again. Right before the close the stock was 28.20 by 28.30. Volume was good for the session, it was holding above the breakout point, so we took a partial position, and we will look at adding to the position Monday if the breakout holds and the stocks starts back up from here.
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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: NCC is testing its breakout. Several of the stocks that broke out last week (on the report) are now testing, but support levels are close so they are still on the report. We don't want to miss a good gains that can come after breakout tests. As usual, we have found new stocks in good patterns. Always exciting!
Best Plays:
1) CTIX: Ready to break to a new high after its test.
2) BORL: A good-looking pattern.
3) ROOM: Moving up on good volume, and broke a trendline.
4) XOMA: Ready to break out.
5) ASN: A very tight handle.
6) AVIR: Looks ready to move up in its handle.
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.
Back on:
ELN (Elan--$61.20; -1.30; optionable (ELN): Drug delivery
http://biz.yahoo.com/p/e/eln.html
STATUS: Testing the breakout after running up to 65 last week in a strong move. Volume was back down over the following 2 days (to 2.47 million Friday; avg. 1.6 million). The stock tested below the 10 day MVA (60.90) but closed back above the support. If ELN can hold here, we are looking for a strong move back over the high lower support is at 60 or at the 18 day MVA (59.58) if the move is initiated from there.
Solid buying. Target: $72.
BUY POINT: Aggressive: Up from here on rising volume. Stop: 56.92 (above the 50 day MVA at 56.46).
POSITION: Stock and/or October $55 calls to buy (ELN JK).
New:
CTIX (Cheap Tickets--$16.22; +0.44; optionable (UEY): Diversified services
http://biz.yahoo.com/p/c/ctix.html
STATUS: Moving on stronger volume (130,800; avg. 187,000) after testing the recent strong breakout (to a high of 16.60). The stock bettered that on the intraday high of 16.75, but pulled back off; that doesn't stop us from anticipating a move over the high as volume continues to roll in. The stock shows outstanding money flow and buying. Target: $20.
BUY POINT: Over 16.60 on average or better volume. Stop: 15.27 (8% below the buy point, and just below the 10 day MVA which is at 15.33).
POSITION: Stock and/or October $15 calls to buy (UEY JC).
Continued: Watching HET for a move back up after it fell below the pivot point.
BORL (Borland--$13.36; +0.06; optionable (BLQ): Software
http://biz.yahoo.com/p/b/borl.html
STATUS: Formed a pennant as it continues to test the early June breakout. Volume rose above average (909,000) to 1.1 million as the pattern tightened up further, showing the second doji above the 10 day MVA (13.05). We continue to look for a breakout over previous highs at the 13.84 range. The stock hit a high of 14.45 on Tuesday, but on a strong move we will look at getting in at the lower range. Keeps showing that very strong money flow and solid buying. Target: $18.
BUY POINT: Over 13.84 on volume in the range of 1.5 million. Stop: 12.73 (just above the 18 day MVA at 12.56.
POSITION: Stock and/or October $10 calls to buy (BLQ JB).
EBAY (Ebay--$67.69; -2.11; optionable (QXB): Internet Software
http://biz.yahoo.com/p/e/ebay.html
STATUS: Looking for a test of the 10 day MVA (65.40) after the stock broke out of its ascending wedge last week. Now the buy point was at 66.63 to the 10 day, so we can live with a test of the MVA, and at any rate like the added support near the buy point. Volume was lower as EBAY pulled back off the breakout high (70.13; it hit 70.50 intraday Friday), at 5.2 million; average is 6 million. From there we will look for strong gains after the test. EBAY is in a 9-month base, showing strong money flow and buying, and high relative strength. Target: $77-78 initially.
BUY POINT: Pullback: On a move back up from the 65-66 range on rising volume. Stop: 60.17.
POSITION: Stock and/or October $60 calls to buy (QXB JL).
UNFI (United Natural Foods--$19.25; -0.20; no options): Food wholesale
http://biz.yahoo.com/p/u/unfi.html
STATUS: Pulled back below the buy point, but the stock looks like it can hold at the 19 range to preserve most of the gain on Wednesday's breakout move. UNFI is stepping its way up the right side of its 21-week base and will likely pull back into another handle-type formation. The last one was shorter than the one in May, however, so we may not have to wait as long this time. Volume dropped back just under average levels at 152,400. Money flow remains solid and buying strong and steady. Target: $21-22.
BUY POINT: Breakout from the cup with handle: 20.05, on volume of 228,000. Stop:
18.45 (just below the 10 day MVA, 18.59.
POSITION: Stock.
FISV (Fiserv--$60.65; -0.19; optionable (FQV): Software
http://biz.yahoo.com/p/f/fisv.html
STATUS: Made a good breakout last week, then pulled back the last 2 days, Friday showing a doji on lower (but still strong) volume of 1.57 million; average is 1.5 million. The stock might try a move back up from the doji, but the still strong volume can take it back down for a test of at least 60, and the buy point is 58.28; a hold there or higher will be just fine. Target: $64.
BUY POINT: Pullback: On a move back up from a test of 58.28 or higher. Stop from the pivot point: 53.62 (50 day MVA, 54.76).
POSITION: Stock and/or September $55 calls to buy (FQV IK).
DFXI (Direct Focus--$41.90; 0.00; optionable (DQF): Consumer durables
http://biz.yahoo.com/p/d/dfxi.html
STATUS: Made that strong move off the 18 day MVA Wednesday, but stopped there, holding laterally the last two days of the week and showing dojis. Got almost a perfect star doji Friday, with the low of 41.03 testing above support of the 10 day MVA (40.01). That support was tested again the previous session, so looks firm for now. Still, we do not like the fact that it could not take out the previous tops at 43.50. Volume was a bit higher at 272,200 (avg. 307,000). Looking for a move out of this range for a break over the June highs at 43.60. Great money flow and buying. Target: $53-54.
BUY POINT: Over 44 on volume of 367,000 or better. Stop: 39.12 (18 day MVA, 38.75).
POSITION: Stock and/or October $35 calls to buy (DQF JG).
FITB (Fifth Third Bancorp--$61.97; -0.68; optionable (FTQ):
http://biz.yahoo.com/p/f/fitb.html
STATUS: Pulled back after the breakout move Thursday. Volume dropped back to 2.2 million (avg. 1.8 million) from the high levels previous session, just what we want. It could test the buy point of 61.24, which isn't far away; we could see a test and move back up intraday. Great money flow, high relative strength, and good buying. Financials should be a leader in a better economy. Target: $65-68.
BUY POINT: Pullback: Up from a test of the pivot point of 61.24, on rising volume.
Stop: 56.34 (below the 50 day MVA, 57.43).
POSITION: Stock and/or August $55 calls to buy (TTQ HK).
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.
Ascending wedges:
Continued:
BBY (BestBuy--$61.82; -1.59; optionable (BBY): Retail
http://biz.yahoo.com/p/b/bby.html
STATUS: Remains in the ascending wedge, after trying to break out Tuesday, but pulled off that day's high of 65.60 on news of a sale of convertible bonds. The stock held up well despite, showing a doji Friday and testing the 10 day MVA on the low of 60.90. Volume was quite high at 5.45 million (avg. 2.75 million). Continuing to look for a breakout. Money flow is very strong. Target: $70.
BUY POINT: 63.54, on continued strong volume. Stop: 58.46 (18 day MVA, 59.34).
POSITION: Stock and/or September $55 calls to buy (BBY IK).
Pennant:
Continued:
OCLR (Ocular Sciences--$24.35; +0.18; optionable (QLO): Health Service
http://biz.yahoo.com/p/o/oclr.html
STATUS: Holding at the 10 day MVA (23.51) for the last three days as volume drops off steadily (down to 49,700 Friday; avg. 129,000). The stock is having trouble with resistance just under 25, the June high, but is showing that it wants to move. It just needs volume. Huge money flow. Target: $30.
BUY POINT: New positions: Over 25 on volume in the range of 68,000. Stop: 23 (18 day MVA, which is right at 8% below the buy point).
POSITION: Stock and/or October $20 calls to buy (QLO JD).
BASING/TRADING RANGES:
Watchlist: BVF moved up again Friday; it is ready to pull back (lower volume) on this run and is likely to form a handle.
New:
LH (Laboratory Cp Am Hldgs--$79.30; +0.30; optionable (LH): Health services
http://biz.yahoo.com/p/l/lh.html
STATUS: The stock is in a 6-month base, currently pulling back in a price-volatile handle that is holding above the 18 day MVA (76.90). Volume dropped back once more, to 443,600 (avg. 488,000) as the stock showed a doji at the top of its intraday range (the low of 77.50 tested just under the 10 day MVA (78.21). Holding up well after its split, riding on the 18 day MVA and we are looking for a move up from here for a breakout. The stock shows solid money flow and buying. Target: $91-95.
BUY POINT: Aggressive: Up from here (or the 10 day) on stronger volume. Stop: 72.96 (just above the 50 day MVA at 72.81). Breakout: 82.63, on volume of 732,000. Stop: 76.02 (18 day MVA is at 76.90).
POSITION: Stock and/or August $75 calls to buy (LH HO). Breakout: Stock and/or August $80 calls to buy (LH HP).
ROOM (Hotel Reservations--$39.12; +0.77; no options): Leisure
http://biz.yahoo.com/p/r/room.html
STATUS: This one is in an interesting pattern, a wide rolling pattern between 25 and 40. Currently the stock is holding in the upper reaches, forming a volatile handle to a 5-month cup base. Friday price moved up from the 10 day MVA (38) on strong volume (average, at 201,000), breaking a short term down trendline of 3 weeks. Looking for a breakout over the May (handle) high of 40.25. ROOM shows super money flow, and relative strength has broken out ahead of price. Target: $44-46.
BUY POINT: Breakout: 40.38, on volume of 302,000 or better. Stop: 37.15 (below the 18 day MVA, 37.76).
POSITION: Stock.
XOMA (Xoma--$14.69; +2.45; optionable (MBU): Biotech
http://biz.yahoo.com/p/x/xoma.html
STATUS: Ready to break out of a cup with handle pattern after it made a very strong move Friday (volume was huge at 5.7 million; avg. 900,000). The moved was boosted by news that a rival drug made by Biogen was not as effective as one made by Xoma and by Genentech. Despite the news, the stock looks ready to make a technical breakout, making the move on volume that had been dropping off nicely in a somewhat volatile handle. Money flow shot to new high levels and relative strength broke out. Target:
BUY POINT: 14.93, on continued strong volume. Stop: 13.88 (10 day. 12.99).
Remains a buy on the breakout up to 15.68.
POSITION: Stock and/or August $12.50 calls to buy (MBU HV).
EQR (Equity Resident--$56.35; -0.50; optionable (EQR): REIT
http://biz.yahoo.com/p/e/eqr.html
STATUS: In a cup with handle pattern of 5.5 months. The stock pulled back on continued decreasing volume Friday (1.7 million; avg. 361,000), halting at support at the 10 day MVA (56.30). Looking for a hold here and move back up for a breakout, although there is the chance the stock can test the 56 level where there is other price support. The 18 day MVA is at 55.56. The stock shows strong money flow and good buying. Target: $63-66.
BUY POINT: 57.63, on volume of 542,000. Stop: 53 (50 day MVA is at 53.94).
POSITION: Stock and/or October $55 calls to buy (EQR JK).
EDMC (Education Mngmt--$36.18; 0.93; optionable (UKN): Diversified services
http://biz.yahoo.com/p/e/edmc.html
STATUS: Formed a 15-week cup with handle base inside a larger 6-month base, and is currently pulling back in a handle. Volume was lower Friday at 114,700 (avg. 192,000) as the stock bounced back from support, the 10 day MVA at 35.20. Looking for a breakout over the handle high of 38.20 (June high). The stock shows huge money flow.
Target: $42-44.
BUY POINT: 38.33, on volume of 288,000 or better. Stop: 35.26 (just above the 10 day).
POSITION: Stock and/or September $35 calls to buy (UKN IF).
ASN (Archstone Comm--$25.85; -0.03; no options): REIT
http://biz.yahoo.com/p/a/asn.html
STATUS: In a cup with a perfect-looking handle, a series of gradually falling dojis on volume that is dropping steadily farther below average in a similar, gradual fashion. Friday's volume was down to 212,000 (avg. 516,000). Approaching support of its 10 day MVA (25.75), we are looking for a strong move back up and breakout over resistance in the handle at 25.96. Tight pattern. Money flow looks good. Target: $29-30.
BUY POINT: 26.09, on volume of 774,000 or better. Stop: 24.
POSITION: Stock.
CNA (Cna Financial--$39.47; +0.20; optionable (CNA): Insurance
http://biz.yahoo.com/p/c/cna.html
STATUS: In a cup with handle of 11 months, previous high near 42. The handle high is 40.24, reached mid-June, but the handle actually started at the end of May, so its length is in good proportion to the size of the base. Friday the low of 39.22 tested the 18 day MVA, and the stock closed with a doji just cents above the 10 day MVA; volume dropped to a low 60,500 (avg. 145,000). Looking for a move back up and breakout from the pattern. Target: $44-46.
BUY POINT: Breakout: 40.37, on volume of 218,000 or better. Stop: 37.14 (just above the 200 day MVA, 36.80). A buy on the breakout up to 42.39.
POSITION: Stock and/or August $35 calls to buy (CNA HG; low open interests).
Continued: Watching IDPH, WFMI (needs to move back over the short term MVAs).
GDW (Golden West--$68.38; -0.57; optionable (GDW): Savings & Loan
http://biz.yahoo.com/p/g/gdw.html
STATUS: Broke out last week, running to Thursday's high of 68.95 then pulling back Friday on lower volume of 511,000 (avg. 679,000). The stock showed a tight doji on that move, which indicates a possible move down to test the breakout. The previous high in the base is at 70.50, and if the stock can't break that resistance without a more extended pullback, we will look for a handle to form. Lower support from here is at the 10 day MVA (66.11). Money flow continues to be solid. Target on a move over 71: $78-82.
BUY POINT: On a move back up from here or the 66 range. Stop: 60.72.
POSITION: Stock and/or August $65 calls to buy (GDW HM).
AVIR (Aviron--$57.54; -1.32; optionable (QCV): Biotech
http://biz.yahoo.com/p/a/avir.html
STATUS: Still holding above the 18 day MVA (57.07) in the handle to its 6-month base, showing a star doji Friday on low volume (which was just higher at 351,800; avg. 514,000). The doji is a strong indicator for a change in direction, so we are looking for the stock to finally turn back up in the handle. A good-looking pattern, and the stock continues with strong money flow and good buying. Target: $71-74.
BUY POINT: Aggressive: Over 59 (intraday high was 58.84) on average or better volume. Stop: 54.28. Breakout: 64.49, on volume of 771,000 or better. Stop: 59.33.
POSITION: Aggressive: Stock and/or August $50 calls to buy (QCV HJ). Breakout: Stock and/or August $55 calls to buy (QCV HK).
WPI (Watson Pharmaceuticals--$63.43; -0.41; optionable (WPI): Drugs
http://biz.yahoo.com/p/w/wpi.html
STATUS: Last week WPI made a solid move up in the handle to its 8-month cup base (which is part of a larger base), but couldn't hold Thursday's high of 64.90 and dropped back next session to test near the 10 day MVA (62.38). Volume dropped back to 741,000 (avg. 903,000). We will see if the stock can mount a move back up to breakout after testing that support. Huge money flow and good buying. Target on the breakout: $71-74.
BUY POINT: Breakout: 65.03, on volume of 1.4 million or better. Stop: 59.83 (just under the 18 day, at 61.20).
POSITION: Breakout: Stock and/or August $60 calls to buy (WPI HL).
BLPG (Boron Lepore--$14.62; +0.12; no options): Diversified services
http://biz.yahoo.com/p/b/blpg.html
STATUS: Still holding in the handle consolidation to the 4-month cup. Volume dropped back well below the average (90,000) to 20,900, but the stock showed a tight doji at the top of the intraday range. It is ready to go for a breakout over the handle high of 14.75 if it gets volume. Still shows the outstanding money flow. Target: $16-17.
BUY POINT: 14.88, on volume of 135,000 or better. Stop: 13.69 (50 day MVA, 13.38).
POSITION: Stock.
PUTS: On index plays, be sure to check with your broker for deltas of 0.75 or better.
OEX (Standard & Poors 100--$636.15; -6.82; optionable (OEY):
STATUS: Closed just below the 10 day MVA (637.52) as volume dropped lower (1.18 million; avg. 1 million). The index may try a test of the 10 day, but if it cannot break it, look for a move down to 625 in market selling.
BUY POINT: After a failed test of resistance at the 637.52 range, on a move back down in selling.
POSITION: August $650 puts to buy (OEY TJ).
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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