stock watch, stock recommendation

Begin Part 2 of 2

Additional Best Play: EBAY

EDMC (Education Mngmt--$39.30; +1.39; optionable (UKN): Diversified services
http://biz.yahoo.com/p/e/edmc.html
STATUS: Education is hot! Solid breakout move today, finding the volume as it ran over the handle high of 38.20 (to a 15-week cup with handle base inside a larger 6-month base). The stock tapped 40 at its high before pulling back to close, but we will look for it to continue the move with strong volume, perhaps after dipping back a bit but holding the 39 range. Target: $42-44.
BUY POINT: A buy up to 40.25 on the breakout. Stop: 35.88 (18 day MVA, 35.67).
POSITION: Stock and/or September $35 calls to buy (UKN IF).

BORL (Borland--$14.79; +0.69; optionable (BLQ): Software
http://biz.yahoo.com/p/b/borl.html
STATUS: Made the initial breakout move Tuesday, then headed higher today as volume surged to 2.58 million (avg. 934,000). The stock beat the buy point of 13.97, and is now out of our range for buying on a breakout (14.67), so we will look for a pullback and test of that pivot point. This was a favorite pattern: cup with handle breakout and then a flat base breakout. Big money flow, and relative strength broke out.
Target: $18.
BUY POINT: Aggressive: Up from here on continued strong volume. Stop: 13.61 (10 day MVA, 13.56). Pullback: After a pullback to test the buy point of 13.97.
POSITION: Stock and/or October $10 calls to buy (BLQ JB).

XOMA (Xoma--$16.99; +0.19; optionable (MBU): Biotech
http://biz.yahoo.com/p/x/xoma.html
STATUS: After failing a breakout move Monday, the stock pulled it off successfully the following session, and continued up today. However, the move stalled as the stock hit up to 17.75, pulling back to close. The close well off of the high is a topping sign, so we will watch for a pullback, looking for it to hold the 16 range (the former pivot point in the cup with handle at 14.80, with the 10 day MVA at 14.70). Great money flow and buying. Our initial target was 17 on the breakout, so we will watch that level carefully on a move back up after some profit-taking.
BUY POINT: New positions, a move up after a low volume (down to 3.34 million today; average 1.17 million) pullback that holds the 15-16 range. We are considering taking profits off of this pattern, looking for new positions if it can make another move up.
POSITION: Stock and/or August $12.50 calls to buy (MBU HV).

Pennant:

OCLR (Ocular Sciences--$26.21; +1.26; optionable (QLO): Health Service
http://biz.yahoo.com/p/o/oclr.html
STATUS: A strong move today, making our buy point (over 25) as volume continued to roll in after Tuesday's increase, coming in at 520,800 (avg. 132,000). The stock tried for this breakout from the pennant several days ago, but needed today's strong volume. Look for a continued move up (the stock hit a high of 26.94). Money flow is strong and relative strength has broken out. Target: $30.
BUY POINT: Up from here on continued strong volume. A buy up to 26.39. Stop: 24.11 (18 day MVA, 23.77).
POSITION: Stock and/or October $22.50 calls to buy (QLO JX; low open interests).

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.

ELN (Elan--$59.03; -1.72; optionable (ELN): Drug delivery
http://biz.yahoo.com/p/e/eln.html
STATUS: Initially we looked to catch this one after it tested the recent strong breakout.
The stock hasn't performed thus, falling below the 18 day MVA (59.62) Wednesday. Volume was quite low at 977,300 (avg. 1.6 million), so the stock may be able to catch support above the 50 day MVA (56.83) or even at 59, a price hit 3 times this month.
BUY POINT: On a move over 61 on volume in the range of 1.3 million.
POSITION: Stock and/or October $50 calls to buy (ELN JJ).

Continued:

EBAY (Ebay--$68.60; +0.24; optionable (QXB): Internet Software
http://biz.yahoo.com/p/e/ebay.html
STATUS: The stock showed a tight doji Wednesday, up from a test of the 10 day MVA on the low of 68.01. Off the Monday high (71.29), the stock looked ready to run that day but pulled back instead, and looks ready to form handle to the 9-month base. EBAY recently broke out of an ascending wedge that formed in the upper right side of that base. We are looking for a complete test back to the 10 day MVA (67.35) on continued decreasing volume, ahead of a breakout. Strong money flow and good buying. Initial target: $77-78.
BUY POINT: Aggressive: Up from the 10 day MVA (67.35 range) on rising volume.
Stop: 63.11. Breakout: 71.42, on volume of 9 million or better. (Wednesday's volume down to 5 million; avg. 6 million). Stop: 65.71 (18 day MVA, 65.63).
POSITION: Stock and/or October $60 calls to buy (QXB JL). Breakout: Stock and/or October $60 or $65 calls to buy(QXB JL or JM).

UNFI (United Natural Foods--$19.82; -0.13; no options): Food wholesale
http://biz.yahoo.com/p/u/unfi.html
STATUS: Tried a breakout Tuesday, moving to a high of 21.15, but the stock couldn't hold it, and today dropped back on lower volume of 292,400 (avg. 161,000). Look for a pullback to the 19.50 range, or the 10 day MVA (19.17). The stock needs a more extended pullback to put together a new strong move out of the base, which has a previous high at 20.38 (intraday high was 20.50). Buying is very strong. Target: $21-22.
BUY POINT: On a move back up after a pullback to 19.17 range or higher. Stop: 17.64 (50 day MVA, 17.44).
POSITION: Stock.

FISV (Fiserv--$62.04; -0.35; optionable (FQV): Software
http://biz.yahoo.com/p/f/fisv.html
STATUS: Made a new all-time closing high Tuesday (62.39), then pulled back slightly to a doji today as volume dropped off, remaining strong at 1.1 million (avg. 1 million). That closing high represented a breakout from the 9-month base, but today's move cancelled that out. The low of 61.25 tested a range of potential support, and the 10 day MVA is at 60.41 if the stock doesn't take it back out from here. Buy point was 58.28. Getting close to our initial target of $64.
BUY POINT: Pullback: On a move back up from a test of the 60 range (or higher). Stop: 55.20 (50 day MVA, 55.80).
POSITION: Stock and/or September $55 calls to buy (FQV IK).

FITB (Fifth Third Bancorp--$61.50; -0.29; optionable (FTQ):
http://biz.yahoo.com/p/f/fitb.html
STATUS: Still pulling back after Thursday's breakout move from the cup with handle, testing the move. Looked ready to move after hitting the 10 day MVA Tuesday, and did, but pulled off Wednesday's high of 62.92 even as volume was stronger (1.6 million; avg.
1.7 million). Look for another test of support at the pivot point of 61.24, or the 10 day MVA (61.02), if not the 18 day MVA (60.35). Great money flow and buying. Target: $65-68.
BUY POINT: Pullback: Up from a test of 61.24 or the 61 range (10 day), on continued rising volume. Stop: 56.34 - 56.00.
POSITION: Stock and/or August $55 calls to buy (TTQ HK).

MOVING AVERAGE BOUNCES: A couple of quick plays.

New (from Monday):

JNJ (Johnson & Johnson--$50.70; -0.41; optionable (AYH): Drugs
http://biz.yahoo.com/p/j/jnj.html
STATUS: The stock split June 12 and as of Tuesday slipped below the 18 day MVA (51.33), and today's low of 50.39 tested nearer the 50 day MVA (49.85). Volume was higher at 9.67 million (avg. 5.3 million), so look for a completed pullback to the 50 day. That support boosted the stock into a 3-point run at the start of June. We are looking at a target near the June high of 54.20.
BUY POINT: Aggressive: Up from the 50 day MVA (49.85 range) on rising volume. Stop: 45.86.
POSITION: Stock and/or October $45 or $47.50 calls to buy (AYH JI).

RAD (Rite Aid--$8.56; -0.61; optionable (RAD): Retail: Drugs
http://biz.yahoo.com/p/r/rad.html
STATUS: Sold back to the 50 day MVA (8.18) on strong volume of 7.66 million (avg. 4.2 million), and bounced back up to close (low was 8.30). Pharmacies had to deal with Walgreen's earnings. The stock made its last 2+ point run from that support, and if it can hold the bounce, we might see another. We were looking for a run up from the 18 day MVA upon introducing the play Monday, for a quick play to the target of 9.99, the June high.
BUY POINT: Over 9 (10 day MVA) on continued strong volume. Stop: 8.28 (50 day MVA, 8.18).
POSITION: Stock and/or October $5 or $7.50 calls to buy (RAD JA or JU).

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:

New:

RCGI (Renal Care Group--$29.53; +0.33; optionable (NUQ): Health Services
http://biz.yahoo.com/p/r/rcgi.html
STATUS: In an ascending wedge and moved off support (18 day MVA, 28.92) on strong volume (which has been building over the last 7 days) of 639,100 (avg. 474,000). Looking for a breakout over the pattern's high point at 30.05. The pattern formed after a breakout from a flat base. Shows strong money flow and decent buying. Relative strength is out ahead of price. Target: $35.
BUY POINT: 30.18, on volume of 640,000 or better. Stop: 27.77 (just below the 50 day MVA, 28.19).
POSITION: Stock and/or September $30 calls to buy (NUQ IF).

Continued:

BBY (Best Buy--$62.13; +0.10; optionable (BBY): Retail
http://biz.yahoo.com/p/b/bby.html
STATUS: Continues to hold the ascending wedge and showing its fourth consecutive doji, volume below average the last three days (down to 1.38 million today; avg. 2.68 million). The stock can test the 10 day MVA (61.03) before making a breakout. Huge money flow and relative strength is out ahead of price, which is bullish. Target: $70.
BUY POINT: Breakout: 63.54, on volume in the range of 3.6 million. Stop: 58.46.
POSITION: Stock and/or September $55 calls to buy (BBY IK).

BASING/TRADING RANGES:

Back on:

BVF (Biovail--$42.78; -0.17; optionable): Drug delivery.
http://biz.yahoo.com/p/b/bvf.html
STATUS: Has been trending up the right side of a cup base dating back to early March, making frequent, short runs up followed by the same sort of move back down. It was moving along its 50 day MVA (40.05) and has now edged up to use its short-term MVA's (10 & 18 day at 42.45 and 41.73, respectively) as support. The last three sessions it has pulled back from a high of 45.10, showing a doji today over its 10 day MVA as volume has settled (down to 424,200 today; average 671,000). Looking for a bounce from here, watching possible upper channel lines at 44 and 45 as possible resistance.
BUY POINT: A bounce up from here on increased volume near the average. Stop: 39.80.
POSITION: Stock and/or $40 calls to buy (BVF JH).

SRNA (Serena Software--$33.29; +4.99; optionable): Software.
http://biz.yahoo.com/p/s/srna.html
STATUS: Broke out of its cup with handle today (handle started forming in early June, the cup, part of a larger cup pattern, in January), moving over the pivot point at 32 with outstanding volume (1.83 million; average 594,500). Still a buy up to 33.60, but after the move we could get a pullback, looking for it to test the 32 level, holding there for another strong move up. That will give us another chance to get in on the strong breakout.
BUY POINT: From here: Still a buy up to 33.60. Stop: 30.96 (200 day MVA, 30). Test: A move up on strong volume after a lower volume test of 32. Stop: 29.76 (10 day MVA at 28.90).
POSITION: Both buy points: Stock and/or August $30 calls to buy (NHU HF).

Continued:

DMRC (Digimarc--$20.25; -5.07; optionable (DQT): Software
http://biz.yahoo.com/p/d/dmrc.html
STATUS: Tanked to the 50 day MVA on a on Dow Jones report that the U.S. Patent Office has rejected several Digimarc claims concerning patents. No new positions.

New (from the weekend):

LH (Laboratory Cp Am Hldgs--$75.45; +0.49; optionable (LH): Health services
http://biz.yahoo.com/p/l/lh.html
STATUS: The stock is in a 6-month base, and has dipped in its handle back toward the 50 day MVA (73.09), which it has tested at its lows the last two sessions. The patterns have been dojis, so we will see if it can bounce back up in the handle, but the high is way out there at 82.50. Volume has continued to be rather strong (616,900 today; average 477,000), but all in all not a bad move down in what can often be a time of weakness post-split. The stock shows solid money flow. Target on a breakout: $91-95.
BUY POINT: Aggressive: Back over the 10 day MVA (76.90) with increased volume. Stop: 71.52. Breakout: 82.63, on volume of 732,000 or more. Stop: 76.02.
POSITION: Stock and/or August $75 calls to buy (LH HO).

EQR (Equity Resident--$56.11; -0.88; optionable (EQR): REIT
http://biz.yahoo.com/p/e/eqr.html
STATUS: In a cup with handle pattern of about six months, and has made a couple of erratic movements. Tuesday saw EQR test 55 at its low before pushing up to close near the handle high of 57.50, but today the stock dipped back again, closing down but pulling up from its intraday low of 55.60. Volume, however, was strong on the drop (579,100; average 352,000), which we do not look for in a handle. We will see if it can stabilize and hold the 56 level, looking ahead to a breakout. Target: $63-66.
BUY POINT: 57.63, on volume of 528,000. Stop: 53 (50 day MVA is at 54.23).
POSITION: Stock and/or October $55 calls to buy (EQR JK).

ASN (Archstone Comm--$25.34; -0.48; no options): REIT
http://biz.yahoo.com/p/a/asn.html
STATUS: Was in a fine-looking handle to a cup, but after gently pulling back with a series of dojis the stock tanked today on big volume (1.03 million; average 510,500). It tapped its 50 day MVA (25.17) at its low, so we will see if it can hold that level, but we are not looking at positions at the moment.

CNA (Cna Financial--$39.50; +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, with a long handle that started in late-May. It is moving in a lateral pattern with the handle high at 40.24, reached mid-June. Continuing the pattern, the stock pushed back up over its 10 day MVA (39.38) but again was not able to hold its intraday high (39.85), moving on low volume after a spike up Tuesday. Looking for a breakout, and the stock shows solid money flow, buying and relative strength. Target: $44-46.
BUY POINT: Breakout: 40.37, on volume of 218,000 or better (average 144,400; today 65,300). Stop: 37.14 (just above the 200 day MVA, 36.81). 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--$65.98; +0.18; 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 but pulled back abruptly. It has, at least momentarily, caught support at its 18 day MVA (65.25), which is right at the highs of the recent saucer pattern (part of a larger cup with a high of 70.50). Volume picked up today as the stock attempted a move up, but after hitting 67.45 pulled all the way back to a loose 'shooting star' doji. It might need to consolidate and form another handle. Not what we like to see in breakouts. Still shows good money flow. Target on a move over 71: $78-82.
BUY POINT: Aggressive: After showing it can hold support in the 65-66 range, a move back over 68 on continued strong volume. Stop: 63.24.
POSITION: Stock and/or August $65 calls to buy (GDW HM).

AVIR (Aviron--$54.78; +1.29; optionable (QCV): Biotech
http://biz.yahoo.com/p/a/avir.html
STATUS: Has steadily peeled back to its 50 day MVA (52.65) in the handle to its cup pattern. It has tapped that support on three consecutive sessions, today hitting it at its low before recovering a bit to show a loose doji. Not a strong move, with volume continuing down to 340,100 (average 500,400). The last drop toward the 50 day was disconcerting, as is the lack of a strong bounce. We will see if it can hold and make a move back up toward the handle high of 64.36.
BUY POINT: Aggressive: Back over the 57 (10 day MVA at 56.17) on average or better volume. Stop: 53.
POSITION: Aggressive: Stock and/or August $55 calls to buy (QCV HK).

WPI (Watson Pharmaceuticals--$62.00; +0.77; optionable (WPI): Drugs
http://biz.yahoo.com/p/w/wpi.html
STATUS: Has dipped back from its breakout attempt (from its handle to an 8 month cup base), appearing to find support at its 18 day MVA (61.39). Today it bounced up from that level, but could not hold a move that hit 63.25 at its high before pulling back. Volume was up above the average at 889,600 (average 876,000). We will see if it can hold the 18 day on a drop back, and still look for a breakout of the pattern for positions. Target on the breakout: $71-74.
BUY POINT: Breakout: 65.03, on volume of 1.3 million or better. Stop: 59.83 (just under the 18 day, at 61.39).
POSITION: Breakout: Stock and/or August $60 calls to buy (WPI HL).

BLPG (Boron Lepore--$14.46; 0.00; no options): Diversified services
http://biz.yahoo.com/p/b/blpg.html
STATUS: Still holding in the handle consolidation to the 4-month cup, but is having trouble holding a breakout move. The stock hit our buy point with breakout volume Tuesday but pulled back to close with a 'shooting star' doji over the 10 day MVA (14.43), and did the same today, but on light volume of 74,900 (average 90,000). We will see if it can manage another move with some volume behind it, but will want to see if it hold this time before taking positions. It hit 15.56 with a similar pattern a couple of weeks ago. It might need to settle back a bit before trying again. Target: $16-17.
BUY POINT: 15.37 on volume of 135,000 or better (average 90,600; today 97,600). Stop: 14.29. We might want to wait for the stock to hold a move over 15 and move up from there.
POSITION: Stock.

PUTS: On index plays, be sure to check with your broker for deltas of 0.75 or better.

FLEX (Flextronics--$23.98; -0.01; optionable (QFL): Electronics.
http://biz.yahoo.com/p/f/flex.html
STATUS: Made a move back up last week, but has lost steam as it has encountered its 18 day MVA (24.05; 50 day at 25.05). After moving up a bit Tuesday, the stock showed a tight doji today at the 18 day as volume picked up to 8.76 million (average 10.8 million). With the difficulty at support, we are looking for a move back with increased selling volume. The target is the recent low at 20.
BUY POINT: A move back below the 10 day MVA (23.49) with increased volume.
POSITION: August $30 puts to buy (QFL TF).

NEWP (Newport--$24.66; +0.01; optionable (NZZ): Electronics.
http://biz.yahoo.com/p/n/newp.html
STATUS: Has now shown four consecutive dojis just under the resistance of its 10 day MVA (25.18), unable to advance after moving up last week from its low of 21. Volume has steadily dropped off over the recent span, down to 1.71 million today (average 3.36 million), and we are looing for a strong drop.
BUY POINT: A strong move back down, looking for increased volume near the average.
POSITION: August $35 puts to buy (NZZ TG).

PMCS (Pmc-Sierra--$27.42; -0.26; optionable (SQL): Electronics.
http://biz.yahoo.com/p/p/pmcs.html
STATUS: Is still stymied under its 10 day MVA (27.92), showing a doji under that level after pushing back up Tuesday. Volume continued to be rather low at 6.67 million (average 9 million), and in a weak Nasdaq we will continue to look for a drop back toward its recent low at 22.34.
BUY POINT: A strong move down, looking for increased volume selling in a weak market.
POSITION: August $40 puts to buy (SQL TH).

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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