us stock market, stock split

Begin Part 2 of 4

SUBSCRIBER QUESTIONS

Q: I don't know when a play is complete...for example, the other day, you mentioned a stock WM, telling the stop figure, the buy figure, and the target figure. The first and second day it did nicely, then it stated to fade. Do I stay, giving it a chance to hit target, and yet possibly having it go down further to the stop and losing money, rather than taking a small profit? In other words... when do I get out?

A: WM was a breakout from a 5-month cup with handle pattern that made the breakout on huge volume 8 sessions ago. The stock ran up to 30.38 and then has pulled back the last two sessions on much lower volume, holding above the pivot point and the 18 day MVA. This is known as a test of the breakout, and each stock that breaks out of such a pattern has a 50-50 chance of testing the breakout point. If it holds (and the good volume on the breakout is a sign that it should hold if the market as a whole does not roll over), the stock will rebound here, and many of the best gains a stock makes comes after a test of the breakout. In a choppier market we will take profit it if hits our target point and starts to turn back down. The market right now has been tougher even on breakouts. We tend to take some profits on our positions when they turn back after the initial breakout run, but keep others for the move back up off of the test. If it is successful, i.e., the stock starts back up on volume back at average or better, we can ad to positions again and take the ride back up.

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

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THE PLAYS:

BONUS PLAYS:

BORL (Borland--$13.36; +0.06; optionable (BLQ): Software
http://biz.yahoo.com/p/b/borl.html
STATUS: Formed a kind of 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).

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.

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.

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).

PRE-ANNOUNCEMENT PLAYS FOR THIS WEEK: Got the announcement from KG this week, and are looking at BMET for next Friday.

BEST PLAYS: Besides the plays set forth below best plays, there are some other stocks that also look good. These include Pre-Announcement FDC, Continuing Candidate ASFC, and Post-Splits DGX, JNJ and LH.

PRE-ANNOUNCEMENT BEST PLAYS:
1) FITB - Solid breakout
2) CEFT - Resting after a breakout move
3) FISV - Testing the breakout
4) BMET - Another test of the breakout

FITB (Fifth Third Bancorp--$61.97; -0.68; optionable): No announcement with the board meeting, but the great breakout move we were waiting for! We are still looking for an announcement with earnings on 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: Made a big breakout move Thursday, hitting 63 at its high, and Friday it pulled back a bit. The stock hit 61.45 at its low, testing its breakout at 61.11, moving on lower volume of 2.25 million (average 1.83 million). Looking for the stock to hold the breakout point if we get another drop, pushing back up on big volume. Target: 68-70.
BUY POINT: Pullback: A strong move up after another test of the 61.11 level. Stop: 56.83. From here: A move over 63 on continued strong volume. Stop: 58.59.
POSITION: Pullback: Stock and/or August $55 calls to buy (FTQ HK). From here: Stock and/or August $60 calls to buy (FTQ HL).

CEFT (Concord EFS--$54.39; -0.17; optionable): Forecast to announce a split on 7-25-01 in conjunction with earnings. At this time the company cannot confirm this date, but based upon our research this is the date for the release.
http://biz.yahoo.com/p/c/ceft.html
BACKGROUND: Last announced a 3:2 split on 8-26-99 at a stock price of $37. Prior to that announced a 3:2 split on 5-14-98 in conjunction with its annual shareholder meeting. The annual shareholder meeting is scheduled for 5-24-01 at 9:30 am CST at which time additional shares will be authorized.
STATUS: A huge move Thursday out of the little consolidation it had formed at the 50 level (testing its break from a cup with handle), and after hitting up to 55.50 the stock took a rest Friday, showing a star doji. Off of this pattern we could see a test back, with the 10 day MVA back at 52.16 (Friday's low 53.79). However, we think it might just move right up from here. Looking good and well in split range. Solid relative strength and buying. Target: 62.
BUY POINT: From here: A move over 55.50 on continued strong volume (5.6 million; average 4.3 million). Stop: 51.62 (10 and 18 day MVA's at 52.16 and 51.37, respectively). Pullback: A move up on continued strong volume after a lower volume pullback to the 53-54 range (low Friday 53.79). Stop: 49.30-50.
POSITION: Both buy points: Stock and/or September $50 calls to buy (EQF IJ).

FISV (Fiserv--$60.65; -0.19; 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 broke out this week from its strong pattern, an ascending wedge formed after a breakout from a cup with handle, surging up four consecutive sessions from its 18 day MVA (57.77). It hit 62.25 at Thursday's high before pulling back, and Friday tested back to 60.65 at its low (10 day MVA at 58.98) before pulling back up for a doji. A little pullback that looks pretty good, and we will look for a continuation of the move back up from here. The all-time high is at 64.13. Target: 68.
BUY POINT: After holding the 60 level, a move back up on increased volume (down Friday at 1.57 million; average 1.52 million). Stop: 56.40.
POSITION: Stock and/or September $55 calls to buy (FTQ IK).

BMET (Biomet--$46.99; -1.15; 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: Made a big move up Wednesday, blasting up from its 18 day MVA (45.88) and hitting a new high intraday at 48.95. After a doji BMET pulled back on low volume Friday (764,500; average 1.76 million), but is holding its 10 day MVA (46.52). A low volume pullback to support is not a bad move, but we have been looking for BMET to make a solid move and keep on going; it just cannot break away. We will see if it can hold and make a move from here. The stock has been quite strong, breaking from a couple of solid ascending wedge patterns, and holding up well between moves. Still showing excellent relative strength, money flow and buying. Target: 54.
BUY POINT: After holding support at the 10 day, a move back up on increased volume near the average. Stop: 43.71 (or just below the 50 day MVA at 43.69).
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) KG - Pulling back to support
2) FHCC - Perhaps one last move
3) LOW - Looking for a move to support and another run

KG (King Pharmaceuticals--$54.27; -1.26; optionable): Announced a 4:3 stock split Thursday! The split takes effect on or about July 19.
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: Got the announcement, but as often happens after a stock has made a strong run, there was no immediate run on the news. In fact, the stock has run up the last few months in the right side of its base, forging a new high earlier this week on its breakout from a cup with handle (hitting 57.88). In such instances, we look for the stock to pull back to near term support, and on the strength of the announcement look for a strong move up from there. In fact, KG has pulled back this week, Friday testing back near its 18 day MVA (53.14) at its low of 53.66. Volume has been rather strong, down a bit Friday at 1.59 million (average is 1.13 million). We are looking for it to hold here, and show us that it is ready to move back up. Target: 64-65.
BUY POINT: After showing that it can hold the 18 day, a run back up on strong, above average volume.
POSITION: Stock and/or October $50 calls to buy (KG JJ).

FHCC (First Health--$51.47; +0.42; optionable): Insurance Broker. Splits 2:1 effective 6-26-01.
http://biz.yahoo.com/p/f/fhcc.html
STATUS: Made a strong pre-split run the past week, finally pulling back a bit Thursday but holding on to show a loose doji Friday. Volume has been very big, up Friday at 2.1 million (average 561,100). With the split Tuesday, we will see if it means to hang on here and run back up; if not, we will be ready to look at downside plays next week. The current move stalled at 52.10, with the all-time high ahead at 55.15. The 10 day MVA is below at 50.13.
PLAY: A move up from here, watching the 52 level carefully for resistance, with stock and/or August $45 calls to buy (FHQ HI - low open interest).

LOW (Lowe's--$77.00; -1.90): Splits 2:1 on July 2.
http://biz.yahoo.com/p/l/low.html
STATUS: Has been strong since breaking from a cup with handle in May, trending up along its short-term MVA's (10 day at 75.30). It made a super run this week, but finally pulled back Friday, showing a closed 'tweezer' (drop Friday mirrors Thursday's rise). That indicates a further drop, but on this strong stock we will look for the 10 day to hold and see if we can get another move up from that support. We do not jump the gun on these plays, but see the move back up.
PLAY: A move up after a lower volume (down to 3.38 million Friday; average 3.1 million) pullback to test the 10 day MVA, with stock and/or August $70 calls to buy (LOW HN - under 100 open interest).

End Part 2 of 4

us stock market
stock split