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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: LEN made a nice move after we noted it holding support at the 10 day MVA. Volume was low on the move, however, so the move sustaining itself will depend on the Thursday market. Volume throughout was low today, so stocks tended to pull back, many closer to or at support levels. This is positioning many for moves back up when the market rallies.

Best Plays:
1) CPWR: A classic cup.
2) PSFT: A tight doji on a pullback.
3) ANF: A lower-volume pullback to support.

New:

CPWR (Compuware--$13.55; -0.09; optionable (CWQ): Application Software
http://biz.yahoo.com/p/c/cpwr.html
STATUS: In a pretty cup base, and pulling back in the handle. The pattern formed just off the bottom of a much larger base of 18 months, and the stock looks ready to hold support at its 10 day MVA (13.26) after pulling back to that level over the last 2 days. That is a rather short handle, so the stock may extend the pullback another day or so (that would be good on even lower volume, which is already down to 1.8 million, below the average of 3.7 million). Looking for a breakout over the handle high of 14. Volume has dropped off in the handle perfectly, as well. Target: $16-17.
BUY POINT: Breakout: 14.13, on volume of 5.5 million or better. Stop: 13.14 (10 day MVA, 13.26). A buy on the breakout up to 14.84.
POSITION: Stock and/or August $10 calls to buy (CWQ HB).

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

Updated:

QTRN (Quintiles Transnational--$24.43; -0.60; optionable (QRT): Diversified Servivces
http://biz.yahoo.com/p/q/qtrn.html
STATUS: The stock broke out of a base in early June and immediately formed an ascending wedge-type pattern above its 18 day MVA; that supported the pattern for another breakout at the end of the month, and the stock is now pulling back on steadily decreasing volume. In the test of the breakout, look for support at the 10 day MVA (23.61); the buy point in the previous pattern is 23.58, right near that support. Looking for a move over the previous high of 26.05. The stock shows huge money flow and great buying. Target: $32.
BUY POINT: Aggressive: Up from the 10 day MVA at the 23.61 range, or the buy point of 23.58, on rising volume. Stop: 21.93 (50 day MVA, 21.04). New high: Over 26.05 on rising volume (average or better). Stop: 24.23.
BUY POINT: Stock and/or October $20 or $22.50 calls to buy (QRT JD or JX).

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

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

ADBE pulled back to the 10 day MVA; EBAY looks like it is ready to hold support at that level (ISSX didn't hurt it one bit, as we suspected). Please see last night's report for buy point and other details. SEBL pulled back on lower volume to close on top of the down trendline it just broke through on Monday.

PSFT (Peoplesoft--$46.34; -1.42; optionable (PQO): Software
http://biz.yahoo.com/p/p/psft.html
STATUS: PSFT is in a 5.5-month base, and Friday broke out of an ascending wedge pattern that formed in the upper right side. Volume wasn't up to par on the move, however, and the stock pulled back the last 2 day as volume fell back below average, nice action on that move at least. Volume was down Tuesday to 3.2 million (avg. 6.6 million) as the stock showed a tight doji above the 10 day MVA (45.67) after tapping the 18 day MVA on the low of 44.90). We like that lower volume pullback and the test and hold above support, and look for a move back up for a breakout over Friday's high of 51.
The stock is showing steadily uptrending money flow and decent buying. Target: $59-61.
BUY POINT: Aggressive: Up from here on rising volume. Stop: 43.25. Breakout: 51.13, on volume in the range of 10 million. Stop: 47.55.
POSITION: Stock and/or October $40 calls to buy (PQO JH).

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

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

LNCR, BJ, ANF, LOW, HI, THQI, BBBY, IGT, RCII, CHS, KG, AEOS.

We are looking at the small and mid-cap stocks for leadership as the economy improves.
BBBY tapped near the 50 day MVA on its low, but the stock moved back over the short term MVAs to close slightly positive on the day. Looks good! HI does too, pulling back to support on even lower volume than Monday. We are looking for a move up from here in a rally.

ANF (Abercrombie & Fitch--$44.25; +0.04; optionable (ANF): Retail: Apparel
http://biz.yahoo.com/p/a/anf.html
STATUS: Pulling back to support; volume was very low at 328,300 (avg. 1.38 million), the overall market pre-holiday volume helping the stock get its legs on some support. ANF tried to make a strong move up Friday, but pulled back these last 2 days. The low of 43.25 tested the 18 day MVA before the stock moved back over its opening price to close with the doji. We are looking for a move up from here or on a bounce from the 10 day MVA (43.38) for a breakout from the flat base. Money flow is strong. We are seeing some specialized retail stocks doing better. Target: $51-53.
BUY POINT: Aggressive: Up from here or the 10 day (43 range) on strong and rising volume. Stop: 39.99 (50 day MVA, 40.31).
POSITION: Stock and/or August $40 calls to buy (ANF HH).

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

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

Time for 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! Thanks to those who have already sent in picks we really appreciate it! In the meantime, BRCM is in a decent pattern right now:

BRCM (Broadcom--$41.79; -1.12; optionable (RCQ): Electronics: Semiconductor
http://biz.yahoo.com/p/b/brcm.html
STATUS: Still very low in its 10-month base but showing a decent pattern; a 6-week cup with handle. The stock moved up to complete the cup Friday on a volume surge, then pulled back the next 2 days, showing consecutive dojis and lower volume on the pullback (Tuesday's volume was quite low at 3.5 million (avg. 10.8 million). The stock can continue to form its handle, pulling back to support in the 40 range, before making a stronger move up. This slow-down in the market is giving it a good opportunity to do that. Looking better with this pattern! Target on a breakout: $49-51.
BUY POINT: 44.23, on volume in the range of 16 million. Stop: 40.69. A buy on a breakout up to 46.44.
POSITION: Stock and/or August $35 calls to buy (RCQ HG).

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

Good Investing!
Jon L. 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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