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us stock market, stock watch
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7/2/01 Stock Split Report Market Summary
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Stock Split Report Subscribers:
PLAYS TO LOOK AT:
BONUS PLAYS:
BEC (Beckman Coulter--$41.31; +0.51; optionable (BEC): Scientific & Electronics
http://biz.yahoo.com/p/b/bec.html
STATUS: In a 6-month base and currently in the handle, a rather volatile handle price-wise, but volume is low and below average over the last seven days. Monday the stock tapped support on the low of 40.92 (10 day MVA), and showed a loosed doji off the high of 41.67. That high tested resistance at that level, and the stock has more at the 42 range.
We are looking for a move up from here or the 10 day MVA on strong volume (Monday's volume was 212,000; average is 388,000). The stock has good money flow. Target: $49-51.
BUY POINT: 42.38, on volume of 582,000 or more. Stop: 38.99 (just under the 50 day MVA, 39.06).
POSITION: Stock and/or August $35 calls to buy (BEC HG; low open interests).
ORI (Old Republic--$29.01; +0.01; optionable (ORI): Insurance
http://biz.yahoo.com/p/o/ori.html
STATUS: In a flat base/ranging pattern that is forming part of the floor of a 6-month base (prior high 32), and showing a tight doji on lower, below average volume (300,900; avg. 377,000). The low tested support at the 10 day MVA (28.77). Potential resistance is at the April and June high (29.80 and 29.90, respectively), so look for the breakout over that level. The stock shows good money flow and decent buying. Initial target: Previous basing highs at 32.
BUY POINT: Aggressive: Up from here on rising volume. Stop: 26.69. Breakout: Over 29.90 on volume in the range of 406,000. Stop: 27.51 (200 day MVA, 27.37).
POSITION: Stock and/or October $25 calls to buy (ORI JE; no open interests).
PRE-ANNOUNCEMENTS: Favorites: BMET, TARO, SEBL, WFMI. PDII and FISV still are solid, with KRB and ATK still looking like puts.
BMET ($46.85; -1.21): Forecast for 7-9-01 before the open with earnings. Gapped down to its 18 day MVA (46.81) today, closing with a 'shooting star' doji pattern. The 18 day has been strong support for numerous bounces by the stock, and volume was up today on the doji (1.89 million; average 1.67 million), indicating we could see a bounce. On the move, stock and/or August and October $45 calls to buy (BIQ HI and BIQ JI). The high is 49.18.
ACS ($72.65; +0.74): Forecast to announce a split on 7-31-01 before the market opens in conjunction with earnings. After pulling back again to the 50 day MVA (72.09) Friday, ACS showed a loose doji pattern on that level today after dipping back to 71.20. A good stock that has shown solid support at the 50 day, so we will look for a bounce back up on better volume near the average (down to 373,000 today; average 774,200), with stock and/or October $70 calls to buy (ACS GN).
ELN ($61.78; +0.78): Forecast to announce a split on 7-18-01 in conjunction with earnings. The company has not confirmed this date. After pulling back Friday, the stock held its 10 day MVA (60.89) today, but volume was quite low on the move up (900,200; average 1.6 million). It is trying to move back up after a test of its breakout (high of 65), and we will look for a stronger run from here over 62, with stock and/or October $60 calls to buy (ELN JL).
PRE-SPLITS:
New Pre-Split Plays:
HRB (H&R Block--$68.41; +3.86; optionable): Tax services. Splits 2:1 August 1.
http://biz.yahoo.com/p/h/hrb.html
STATUS: Recently broke from a 22-month cup with handle, and after testing that break with a long, lateral consolidation, it broke out again today, moving on big volume of 1.22 million (average 537,000). Still a buy up to 68.80, and we could get a bit of quick profit-taking that will drive the price back a bit, but we will look for it to hold above the 65.50 pivot point for a strong move back up.
PLAY: From here, stock and/or October $65 calls to buy (HRB JM). On a move up on strong volume after a lower-volume pullback that holds above the breakout, stock and/or October $60 calls to buy (HRB JL).
TARO (Taro Pharmaceutical--$86.09; -1.47; optionable: Drugs. Splits 2:1 July 27.
http://biz.yahoo.com/p/t/taro.html
STATUS: Broke out from a cup with handle last October and has increased more than fourfold since. It announced the split last week and after making a quick run up looks ready to pull back a bit, today falling back but pulling back up to close after testing its 10 day MVA (82.54) at its low of 83.77. We will watch for another test of that level, or perhaps lower (18 day at 78.45), looking for a continuation of the move up after that rest.
PLAY: A move up on continued strong volume (down to 557,400 today; average 422,000), after lower-volume test f the 78-82 range, with stock and/or August $75 or $80 calls to buy (QTT HO - low open interest, or QTT HP).
Continuing Pre-Split Plays:
ING ($67.33; +1.46): Splits 2:1 effective July 13. Another good move from ING today, gapping up and reaching 68.13 before pulling back to close. Volume remained solid (118,800; average 117,000), but the pullback to close could foreshadow a move down before the stock continues up again. If it does, looking at a move up after the stock holds the 66 range, with stock and/or August $60 calls to buy (but very low open interest). From here, we can still play a move up, but we are carefully watching the 200 day MVA as resistance at 68.82. On a continued strong move up, stock and/or August $65 calls to buy (but very low open interest).
RAVN ($27.00; +0.11): Splits 3:2 effective July 16. Continues in its tight, lateral consolidation, showing another doji today over its 10 day MVA (26.79) after reaching up to 27.25. We are still looking for a move over 27.25 on average or better volume (5770; today up to 3400), with stock.
CONTINUING CANDIDATES: ACF, CBH, MERQ and CECO could be ready to make moves.
MIKE ($40.72; -0.28): Made a breakout move Friday, but closed off of the high of 42.06. Today it gapped down to open, but made a good move back up, closing down for the day, but making a good recovery on solid, though slightly down, volume (310,500; average 221,700). On a move over 41 on continued strong volume, stock and/or September $35 calls to buy (IKQ IF).
FDC ($65.72; +1.37): After a very strong drop Friday the stock made a bounce today, and was able to close back over the 50 day MVA (65.37) but the move was on sharply lower volume (1.58 million; average 1.54 million). We will see if it can hold, but if it cannot and gives way to heavy selling down, below 64, August $70 puts to buy (FDC TN).
POST SPLITS:
CAKE ($27.67; -0.67): After a couple of great moves, the stock pulled back a bit today, dropping on the sharply lower volume we like to see on a pullback (629,800; average 430,000). We will see if it holds here, but we could get a bit more of a drop back to 27. If it can catch support there or higher, we are looking for a strong move back up, with stock and/or October $25 calls to buy (CFQ JE).
GENZ ($59.25; -1.75): Broke out Friday but closed well off of its high of 64, so we were expecting a pullback. Today GENZ gapped down to open, and held steady all session for a doji on lower volume (3.48 million; average 3.14 million). We will see if it can hold over its prior high of 58.44, and on a strong move up with increased volume, stock and/or October $55 calls to buy. Stop: 55.80.
DGX ($73.00; -1.85): Made the expected draw back off of Friday's doji, and it managed to close at its prior breakout point of 73 after testing as low as 71.55 (its up trendline connecting March-May closing lows). Looking for it to hold here, and make a move back up on increased volume (down to 633,800 today; average 455,300), with stock and/or August $70 calls to buy (DGX HN).
SEBL ($49.53; +2.63): Made a nice move today, gapping up and hitting as high as 50.90 before pulling back to close. This continues its solid move over the last week, and today's action was on increased volume of 15.4 million (average 16.5 million). We could get a pullback here, but will look for it to hold on around 47-48, and on a move back up on increased volume, stock and/or August $45 calls to buy (SGW HI - next expiration is November).
WFMI ($28.30; +1.20): Gapped down to retest its 50 day MVA (26.50) but powered back up intraday, closing near its high (28.37) and moving on strong, though lower volume (907,400; average 482,000). On a continued move over 28.50 (the aggressive play) on continued strong volume, stock and/or August $27.50 calls to buy (FMQ HY). The breakout play is on a move over 29.55 with minimum volume of 720,000, with the same positions.
* * THE SUMMARY * * *
TONIGHT:
- Indexes continue their recent divergent ways.
- Economic news still looking better and all of the sudden there are some converts.
- Warnings rampant, and some techs get hammered after hours while blue chips shook off their warnings.
- Subscriber Questions
- Team Trades
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THE SUMMARY
Indexes go their own ways.
The Nasdaq was running up the past week while the Dow and the S&P 500 were selling down. They looked ready to swap horses, and as we thought over the weekend, the Nasdaq started to sell, and that gave life to stocks in other sectors of the economy. MMM warned, but it rallied over $3. Some Nasdaq stocks warned after the close and they were clocked for $3, $6, and even $16 losses. What does this show? One, investors are still very nervous about tech earnings and the prospects for a tech recovery. Second, it shows that the better than expected economic numbers are having an impact on investor psychology as investors are willing to shrug off warnings in light of the idea that the economy is getting much better and will be much better in the second half.
Indeed, the improving economic reports we have been really talking up the past 2-3 weeks added another to the fold today with the NAPM (National Association of Purchasing Managers) improving much more dramatically than expected (44.7 versus 42.5 expected). This brought some converts out of the closet, and they were saying 'golly, we now think we ARE going to see a recovery in the second half of this year.' Remember, Bob Pisani, Maria B and company on CNBC had already 'buried' the idea of an economic recovery for the second half of 2001 just last week. The point is the same one: don't listen to the news media. These people were not reporting the news, they were editorializing as they always do. It is okay, but we have to recognize it for what it is.
Warnings hit with fury now that the quarter is closed.
Warnings are coming out fast as companies were waiting to see how the quarter actually turned out before having to warn or breathe a sigh of relief. The fact that so many waited is really a good sign: it was close enough to warrant waiting to see how the numbers actually shook out. We don't want to sound like a broken record, but this is a history lesson we are hearing now; the real story is what they say in the coming two weeks about the future.
But also, we need to think about something else. We think we are going to hear more positive comments going forward. Tonight VRTS said it still had visibility as always. That is no big deal; just because you can see a wreck coming does not make it better than not seeing the wreck (it does, but you get the idea). The important fact was that it saw firming. Unpredictable to a certain extent still, but definitely firming. We are going to see those kind of statements, some stronger positive statements, and some more negative statements over the next few weeks. It is our view that we will see more optimistic statements. Maybe not in total numbers, but more than last quarter. Moreover, we expect the CEO's to be in better moods: six rate cuts, tax cut, better economic numbers; they will be looking to the future based on what has been happening in the economy.
Now for those negative statements we have to remember something historical. Yes businesses are the best at doing their business; otherwise they are out of business. That does not, however, make them the best economic forecasters. We like to talk with them because they give us insight to business conditions and many of them are very good at predicting their future business. Still, as with anyone human, they can get in with too much emotion that clouds their vision. Here is the point: Historically, the aggregate of business leaders miss the first turning signs of the economy. They are focused on their business, and they can miss the signs that are out there. Again, in the aggregate, business leaders miss the first signs of economic upturn. Some individuals are able to look at the bigger picture and they see the turn. We will be hearing positive things from those.
THE ECONOMY
Interesting facts about economic recoveries.
We spend a lot of time looking at history for facts that help us understand the present and the future. When we take a position as we did the past week and over the weekend about where we feel things are heading, we like to provide factual basis for it. There is no 'gut' feeling here, but a conclusion based on analysis of facts. To show that, we include the factual basis for our position. We all know that opinions without explanation are cheap; we hear at least a dozen a day. We put our reasoning out in the open for all to see and refute or agree with. The goal is to get everyone thinking about what makes markets and stocks move higher and lower so they can make good decisions for their own account. Not every play is for everyone. But if you understand why we are getting into a stock, then you can analyze your portfolio and see if it is good for you.
NAPM surprises to the upside.
Some other facts that we have come across: each time the NAPM has recovered 3 points off of its low it has accurately forecast economic recovery with a lead time of about 1.7 months. In January the NAPM hit 41.2%. Today the June reading came in at 44.7. That is a 3.5 point rise off of the low. While a 44.7 reading still shows a contracting manufacturing sector, this historical gauge is a real positive for the economy and thus the market over the next several months.
In addition to the overall upside surprise with the number, the new orders component rose 3% and it is almost at the 50 level which would show an expanding manufacturing picture for the future. Increasing new orders leads to increasing production and then new hiring. To make things even nicer, the prices paid component continued to fall indicating no inflation pressure at this point.
Personal income slows its rise as spending picks up speed.
Personal income rose by 0.2% in May versus the 0.3% anticipated. Not as great, but still positive. Spending rose a higher than expected 0.5% (0.3% expected and 0.5% in April). This is some cause for concern if the consumer debt is still rising and consumers run out of gas before the economy can recover. The Fed is pumping up the money supply and admonishing banks to free up that money to prevent this from happening.
Another interesting historical fact: cash moved to money market accounts has risen 15% in recent months as investors move money out of stocks and park it. In the past, except for one occasion back in the 1960's, when cash in money market funds climbed 10%, the indexes rose on average 21% in the following 12 months. The point: a contrarian indicator because it is a sentiment indicator, telling us what the crowd is doing. The crowd is usually wrong.
End Part 1 of 2
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