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Begin Part 2 of 2
Support and Resistance Levels
Nasdaq: Closed at 2080.11.
Resistance: 2160 to 2200. Then 2250.
Support: 2100 did not try to hold. That puts us looking at 1990 (1973 on the low side), roughly where the index gapped higher in April and where it most recently turned.
S&P 500: Closed at 1219.24.
Resistance: 1240 to 1250.
Support: 1200 is where we would like to see it hold. Head and shoulders bottom and the breakout support from the double bottom pattern is right at 1182.
Dow: Closed at 10,479.86.
Resistance: 10,600 (the 200 day MVA is at 10,593.85). Still resistance at 10,700 and again it is not really clear up to 10,800. 11,000 is possible resistance after that.
Support: 10,400. Then 10,200 to 10,250.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
7-2-01
Personal Income, May (8:30): 0.2% actual versus 0.3% expected and 0.3% prior.
PCE, May (8:30): 0.5% actual versus 0.4% expected and 0.4% prior.
Construction Spending, May (10:00): 0.1% versus 0.3% prior.
NAPM Index, June (10:00): 44.7% actual versus 42.5% expected and 42.1% prior.
7-3-01
Factory Orders, May (10:00): +2.5% actual versus 1.5% expected and -3.4% prior (revised from -3.0%).
7-5-01
Initial Claims, 6/30 (8:30): 399K actual versus 393K expected and 392K prior (revised from 388K).
Auto Sales, June (0:00): 6.4M versus 6.4M prior.
Truck Sales, June (0:00): 7.1M versus 7.2M prior.
NAPM Services, June (10:00): 52.1% actual versus 47.0% expected and 46.6% prior.
7-6-01
Nonfarm Payrolls, June (8:30): -40K versus -19K prior.
Unemployment Rate, June (8:30): 4.6% versus 4.4% prior.
Hourly Earnings, June (8:30): 0.3% versus 0.3% prior.
Average Workweek, June (8:30): 34.3 versus 34.3.
TEAM TRADES
BORL: We bought BORL on the breakout at about $12 a few weeks back and let it form its subsequent ascending wedge and breakout of that pattern. It rallied to $15.75 on 6-29 and showed a doji. We should have sold at the end of that session, but did so early the next session as the stock opened just a bit lower and started to sell more. It tanked more on Tuesday and then today fell again on higher volume, but showed a tight doji that tapped the 18 day MVA on its low. That is an indication that the move back up will start, particularly as that held above the ascending wedge breakout. We put in an order to buy the options back at 1.70 (they were bidding 1.65 by 1.90). We got the fill later in the session, and now we will be ready to play the move back up. If it breaks down, we will exit. A variation on what we discussed in the summary session above.
BVF: BVF closed at 43.42 with a tight doji Tuesday, at support in its cup with handle pattern. Thursday the stock opened right there and moved up and was at 44.38 by 9:15, on volume of 105,000. Now previous volume had been a low 376,800 (avg. volume is 665,000), but that was higher than that of the session before, and the stock looked like it might move. As we looked at Thursday's intraday chart, the stock stalled and dropped back to test the 44.20 level, and by 9:43 was holding there on volume of 230,000. So, volume was at least moving up decently by this time. Things became more interesting when the stock popped up to 44.35, but then watched the stock drop back to test just 44.04 (44 marks price support early in the base).
We were thinking of taking some positions on a move up form there, but decided to see how the stock would move later in the session. With 15 minutes left in the session, the stock was back down to 44.31, with volume at 561,000--a better entry point if we did get in. Now volume was above average and higher than Tuesday's volume, and this was looking like the start of a breakout move. It was one of the better movers in the session as we reviewed the board, but still no breakout yet. So, we decided to split the baby with a partial position. We put in an order for the stock at 44.45 and that was done with about 10 minutes before the close. The stock closed at 44.48. We are anticipating the breakout a bit, but we liked what we saw a the end of the session and will complete the position with the breakout. Averaging up.
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: Keep an eye on ANSS; it looks ready to move if volume continues to rise. We like the excellent volume some of tonight's plays are showing, whether stronger on moves up, or lower in shakeouts.
Best Plays:
1) LEN: Strong volume and a break of resistance.
2) FRED: Ready to move on the strong volume.
3) OCLR: Shaking out the last stockholders.
4) HI: Another super shot of volume.
Updated:
LEN (Lennar--$44.40; +0.60; optionable (LEN): Materials & Construction
http://biz.yahoo.com/p/len/len.html
STATUS: Broke resistance at the 40 level on strong volume of 1 million (avg. 847,272).
The stock broke out of a double bottom with handle pattern June 28, but pulled back and tested the 10 day MVA (42.16) a couple of days later; from there the stock gapped higher until making the resistance break today. The intraday high of 44.87 tested further resistance at 45. We are looking for a move over the May high of 46.69. Support at 44 on a pullback on lower volume. Strong money flow. Target: $53.
BUY POINT: Aggressive: 46, on continued rising volume. Stop: 42.78 (above the 10 day MVA, 42.16).
POSITION: Stock and/or August $40 calls to buy (LEN HH).
http://www.investmenthouse.com/cd/len.html
FRED (Fred's Inc--$25.48; +0.18; no options): Retail
http://biz.yahoo.com/p/f/fred.html
STATUS: Last covered 6-20 as the stock looked ready to break out of a cup with handle. It did break out, but couldn't hold the high at 26.75, instead working its way into a test of the 18 day MVA by 6-27. The stock bounced to a new all-time closing high at 25.75, then pulled back in another test of the 18 day (currently at 24.26). The stock opened higher Thursday (at the 10 day MVA, 24.81) and on a volume surge (117,900; avg. 86,454) moved up from there. Looking for a breakout move over the recent highs. FRED has strong money flow and good buying. Relative strength is just ahead of price. Target: $30.
BUY POINT: Aggressive: Over 26.10 on continued strong and rising volume. Stop: 23.76 (a half-point below the 18 day MVA).
POSITION: Stock.
http://www.investmenthouse.com/cd/fred.html
OCLR (Ocular Sciences--$24.66; -0.39; optionable (QLO):
http://biz.yahoo.com/p/o/oclr.html
STATUS: Last covered June 13. OCLR broke out of a cup with handle base in mid-May, then tested that breakout by forming a pennant pattern from which it broke out (on two tries), pulling in good volume at the end of that month. From a breakout high of 26.94, the stock pulled back over the last week, as volume drops off further and further below average, the kind of price/volume action we like on pullbacks. That volume was down to 27,300 Thursday (average is 139,454), as the stock closed between the 10 and 18 day MVAs (the former at 24.78 and the latter at 24.30). Look for a strong move back up from the 18 day MVA (at the lowest) for the break over the previous high. Great money flow and buying. Target: $31.
BUY POINT: Over 27 on volume in the average or better range. Stop: 25.11.
POSITION: Stock and/or October $20 calls to buy (QLO JD).
http://www.investmenthouse.com/cd/oclr.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
On a day when software did not do well, ADBE pulled back but volume was lower still and well below average. The stock showed a doji above the 18 day MVA (44.23) and just may bounce from that support.
http://www.investmenthouse.com/cd/adbe.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.
HI (Household Internat--$66.95; +0.72; optionable (HI): Credit Services
http://biz.yahoo.com/p/h/hi.html
STATUS: HI looks good here, still holding above the 18 day MVA (65.94), and making a small move up today on a surge in volume (1.75 million; average daily volume) in the ascending wedge pattern it has formed at the bottom of its 7-week cup/saucer base. The volume can break this stock above the recent June highs at 67.45 (pattern high); if so, we are going to look at taking positions on the breakout, as long as volume remains strong and rising. The stock is showing strong money flow and good buying, and relative strength broke out, which is bullish. $78.
BUY POINT: Breakout from the ascending wedge: Over 67.58, on volume in the range of 2.4 million. Stop: 62.73. New high: Over 70 (69.98 is the May high) on volume in the range of 2.4 million. Stop: 65.10 (64.97, 50 day MVA).
POSITION: Ascending wedge breakout: Stock and/or October $60 calls to buy (HI JL).
New high: Stock and/or October $60 or $65 calls to buy (HI JL or JM). Delta is 0.650 currently on the $65 strike, but that can improve to 0.75 or better as the stock approaches the high near 70.
http://www.investmenthouse.com/cd/hi.html
BBBY (Bed Bath & Beyond--$30.66; +0.10; optionable (BHQ): Retail
http://biz.yahoo.com/p/b/bbby.html
STATUS: BBBY is showing quite low volume over the last 3 of 4 days (below average all 4 days), coming in Thursday at 1.7 million (avg. 3.47 million). The stock is holding above its 18 day MVA (30.26) against a backdrop of the volume scenario, and that looks good for the support to hold until price can rally back up. The pattern is a flat base/ranging formation (in June looking more like an ascending wedge), with upper resistance at the 32 range (June high is 32.61), evolving after the stock broke out from another wedging-type pattern mid-May. Look for a move up from the 18 day MVA on strong volume. Target: $37.
BUY POINT: Breakout: Over 32.61 on average or better volume. Stop: 30, just below the short term MVAs.
POSITION: Stock and/or August $27.50 calls to buy (BHQ HY).
http://www.investmenthouse.com/cd/bbby.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! We will begin tallying the returns next week.
BRCM continued to pull back in the handle of its cup with handle pattern, though volume was stronger today as the techs sold down (see chart); that is not what we like to see in handles. Holding up pretty well considering, however, though a test of the 50 day MVA (38.91, or the 18 day MVA just below at 37.84) is likely here.
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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