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Begin Part 2 of 2

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.

Best Plays: TUTR kept moving, but is topping out on its breakout. KKD is holding support above the 18 day MVA, and COO still looks interesting in its cup with handle pattern. ESI started a move up today on good volume after testing its breakout; looks ready to break resistance at the June high of 44.90. Check out the put plays if the the market begins some earnest selling; we can also play the downside for profit!

Best Plays:
1) QQQ: Looking for a quick put play.
2) EBAY: Up on stronger volume!
3) PSFT: Showing a doij at support as volume drops off.
4) BMET: Another low-volume doji.

THE PORTFOLIOS: Each report, we look at these to see which is in a buy position. We don't cover them all each time, just the ones that are looking as if they are ready to pick up a few shares. We are "weeding" the portfolios this weekend.

THE LEADERS: We have revamped this portfolio, dropping for now CPN, SGR, NATI and BRKS. Those stocks have, for the most part, dropped off and need to form bases or do some more work in ones already existing. To the New Leader section we are adding DGX, EBAY, FRX, PSFT, ADVS, and BMET. In the Previous Leader section, VRSN, VRTS, ADBE and SEBL are retained. Ones dropped include AMCC, ARBA, BEAS, BRCD, CIEN, EMC, EXTR, GLW, JNPR, NEWP, NTAP, PMCS and SCMR. All of these stocks will be kept on watch in context with improvement in their sectors and the market.

New Leaders: ESRX, LLL, ACS, NVDA, DGX, EBAY, FRX, PSFT, ADVS, BMET
Previous Leaders: ADBE, SEBL, VRSN, VRTS

EBAY (Ebay--$71.04; +3.25; optionable (QXB): Internet Software
http://biz.yahoo.com/p/e/ebay.html
STATUS: Moved up after Friday's lower volume pullback. The stock gapped up to 68.63 on the opening price and moved up from there on stronger volume (at average levels by the end of the day, 6.17 million). Look for a continued move up as volume rallies; often stocks will post strong gains after testing breakouts, which is what EBAY very briefly did. The stock is in a 9-month cup base, and shows strong money flow and buying. Relative strength broke out as well. Initial target: $77-78.
BUY POINT: From here on above average volume (in the range of 7.5 million). Stop:
65.36 (10 day MVA, 66.78).
POSITION: Stock and/or October $60 or $65 calls to buy (QXB JL or JM).

http://www.investmenthouse.com/cd/ebay.html

PSFT (Peoplesoft--$43.73; +1.02; optionable (PQO): Application Software
http://biz.yahoo.com/p/p/psft.html
STATUS: The stock is in a 21-week cup base, and Thursday tried to make a breakout from a handle that was showing some volume swings (instead of the gradual pullback we like to see). The stock dropped back Friday both in price and volume (that's good action) to close at the 18 day MVA, from where it bounced today, back above the 10 day MVA (43.13). After testing support at the 50 day MVA several days ago, we like the current hold at the 18 day MVA, and are looking for a move up from this very tight doji. Volume was lower at 4.5 million (avg. 6.7 million). PSFT shows strong money flow and high relative strength. Target: $54-57.
BUY POINT: Aggressive: Over 44.60 (intraday high) on stronger volume. The stock can re-test the 10 day MVA, then bounce back up for the move. Stop: 40.03 (above the 50 day MVA, 39.43). Breakout: 49.28, on volume of 10 million or more. Stop: 45.34.
POSITION: Stock and/or October $37.50 calls to buy (PQO JU). Breakout: Stock and/or October $40 or $42.50 calls to buy (PQO JH or PQO JT).

http://www.investmenthouse.com/cd/psft.html

BMET (Biomet--$47.14; +0.15; optionable (BIQ): Health Services
http://biz.yahoo.com/p/b/bmet.html
STATUS: In a strong uptrend since June of last year. Currently the stock is in a pullback off the June high of 48.95 (as volume dropped off to below average levels), and Monday closed showing a very tight doji (only $0.04 between opening and closing price). Volume bounced back up slightly on the move, to 981,200 (avg. 1.7 million). The low of 46.76 tested support at the 10 day MVA, and the stock can initially test that again before heading up from here. We are looking for a strong move back over the June high of 48.95, and note that the stock tapped at 48.75 earlier this month. BMET shows strong money flow, high relative strength, and good buying. Target: $55.
BUY POINT: Aggressive: From here or 46.63 (10 day MVA) on continued rising volume. Stop: 42.90 (below the 50 day MVA, 43.83). New high: Over 49 on volume in the range of 1.3 million. Stop: 45.08.
POSITION: Stock and/or October $40 calls to buy (BIQ JH).

http://www.investmenthouse.com/cd/bmet.html

UP & COMERS PORTFOLIOS: We have revamped the Up & Comers portfolio, keeping LNCR, BJ, ANF, LOW, HI and THQI. We are dropping EXDS, TQNT, BVSN, SANM, PKI and GMST for now, and adding BBBY, IGT, RCII, CHS, KG and AEOS.

MEMBER PORTFOLIO: BRCM, CHKP, CSCO, EMLX, IDTI, INTC, JDSU, MVSN, NT, PWER, SUNW, VTSS

Time or a new survey on what stocks members want in the portfolio. Let us know with an email, and we will compile the stocks with the most suggestions!

PUTS: On index plays, please check with your broker for deltas (we like 0.75 or better).

QQQ (Nasdaq 100--$43.36; +0.11; optionable (QQQ):
STATUS: Showing a doji tucked under the 10 day MVA (43.65) as volume dropped lower below average (39 million; avg. 67 million). The index moved up from a low of 42.65 but if it cannot break the resistance of the moving average, we will look at shorting it down to the 41 range. That is a quick 2-point drop, and if the index breaks that support, we are looking at 40. Make sure the market is selling, and watch 41.
BUY POINT: Aggressive: Down from here on stronger volume in market selling.
POSITION: August $51 puts to buy (QQQ TY). Please check with your broker for deltas.

CIEN (Ciena--$40.38; -1.12; optionable (EUQ): Telecom
STATUS: Moved up the previous three days and opened higher Monday, but resistance at the 10 day MVA (42.82) turned the stock back down. Volume was lower at 18 million (avg. 26 million) and the stock bounced up from a low of 39.73. We will look at the downside play on a break below the low in market selling. Target: 35.
BUY POINT: On a move below 39.73 on rising volume in a selling market. The stock may move back up to the 10 day MVA and if it does, we can look at getting in on a move back down from there.
POSITION: October $60 puts to buy (EUQ VL).

Good Investing!
Jon Johnson and The Daily Staff

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 of 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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