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Begin Part 2 of 4

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.

7-9-01
Consumer Credit, May (15:00): $9.4B versus $13.9B prior.

7-10-01
Wholesale Inventories, May (10:00): 0.0% versus 0.3% prior.

7-12-01
Initial Claims, 7/7 (8:30): 391K versus 399K prior.
Export Prices ex-ag., June (8:30): -0.3% versus -0.3% prior.
Import Prices ex-oil, June (8:30): -0.2% versus -0.2% prior.

7-13-01
PPI, June (8:30): -0.1% versus 0.1% prior.
Core PPI, June (8:30): 0.1% versus 0.2% prior.
Retail Sales, June (8:30): 0.2% versus 0.1% prior.
Retail Sales ex-auto, June (8:30): 0.2% versus 0.3% prior.
Michigan Sentiment-Prel., July (9:45): 93.0 versus 92.6 prior.

SUBSCRIBER QUESTIONS

Q: I am a new subscriber and I see a great deal of information but no explanation of what are and how to use stop protection levels.
A: This is a frequent question, and we would refer anyone to the FAQ's on the Investment House home page. Basically, we have a 7% rule on new purchases where we will sell any new purchase if it drops below 7%. This is not an uncommon rule among many successful investors. That way you never let a play that is not working out turn into a big loss. We attempt to list a stop position on each play in each newsletter for that particular entry point that we are looking at. Many times we like to use a stop point just below a support level such as a breakout point, moving average, or trendline. That way if the support is broken, we know the character of the investment has changed, and we are moved to action. The protection of the support is gone, and that should get our attention. Again, we list stop points on each entry point.

After that, we use trailing stops as the position moves higher, particularly in a choppy market where we want to maintain profit that can evaporate on us if the market take a sudden, unwanted turn the other way. Setting these is much more difficult as it is more a question of individual investor comfort with where to place the trailing stop. Usually what we do is let a stock make its first run, and when it starts to show signs it is topping we will slide a stop loss in at a point that will protect the gain we have, willing to sell out at that point rather than ride it down. Also, as discussed on Thursday, we will also at times sell a call at that point if we feel good about the stock holding at support on a test of the breakout. We recently described that with BORL. Friday BORL sold down more, but then finished the day higher; if the Nasdaq catches itself at this level, BORL is primed (as are many stocks testing their breakouts) for another move higher. When the market gets choppy, we prefer to put in stops or just sell when a stock shows topping signs (doji after a good run, moving higher on lower volume, a close well off the high on lower or very high volume). Bank some profit and catch it on the move back up. Better to pick the fruit and put it in the basket than take the chance that it falls and rots.

THE PLAYS:

BONUS PLAYS:

SRZ (Sunrise Assisted Living--$26.94; -0.16; optionable): Long-term health care
STATUS: SRZ is in a 7 month cup with handle base and appears to be forming the handle right now on extremely low volume (100,100; average is 226,000). It hit a high of 27.90 Monday, and has pulled back on very low volume since that time. It showed a tight doji Friday above the 10 day MVA (26.50). Looking for the breakout on a volume surge. Relative strength is at breakout levels right now.
BUY POINT: 28.02 on volume of 340,000.
POSITION: Stock and/or October 22.50 calls to buy (SRZ JX).

ROIAK (Radio One--$20.80; -0.18; no options): Radio Broadcasting
STATUS: ROIAK has had an excellent year, and over the past seven weeks has formed a double bottom with handle pattern. The stock ran up hard two weeks ago, and last week it pulled back in its handle on extremely low volume (339,300 Friday; average is 550,000). Friday the stock showed a very tight doji as it closed just above its 10 day MVA (20.63). We are looking for the breakout on strong volume.
BUY POINT: 21.12 on volume of 825,000.
POSITION: Stock; no option chain.

PRE-ANNOUNCEMENT PLAYS FOR THIS WEEK: Looking at PDII, BRO, BMET and KRB this week!

NEW PRE-ANNOUNCEMENT PLAYS:

RHB (Rehabcare--$46.10; -0.10; no options): Forecast to announce a split on 8-7-01 in conjunction with earnings. At this time the company cannot confirm this date, but based upon our research this should be the date.
http://biz.yahoo.com/p/r/rhb.html
BACKGROUND: Last announced a 2:1 split on 5-15-00 at a stock price of $41. The annual shareholder meeting was on 5-3-01 at which time additional shares were authorized.
STATUS: Hospitals. RHB has formed a cup with handle pattern (dating back to late-February, and formed out of a larger cup dating back to the beginning of the year, high of 52.50). It tried to make a breakout move last week but came up just short of the handle high of 49 and has pulled back to regroup. A decent pullback, coming on low volume and holding what has been support at the 18 day MVA (45.80). Friday saw the second consecutive doji, so we will see if the stock can start another move toward the breakout. Shows good relative strength and money flow. Target on breakout: 54-55.
BUY POINT: Aggressive: A move over 47 on increased volume near the average (130,000; Friday down to 38,000). Stop: Just below the 50 day MVA at 43.68. Breakout: 48.13 on volume of 195,000. Stop: 44.76.
POSITION: Stock only.

BJ (BJ Wholesale--$53.55; -0.30; optionable): Forecast to announce a split on 8-21-01 in conjunction with earnings. At this time the company cannot confirm this date.
http://biz.yahoo.com/p/b/bj.html
BACKGROUND: Last announced a 2:1 split on 2-4-99 at a stock price of $44. The annual shareholder meeting was on 5-24-01 at which time no additional shares were authorized. The company has sufficient shares for 2:1 split.
STATUS: Has been very strong, breaking from a cup with handle in February, and then has surged again after a March-May pullback. The stock recently hit a high of 54.86, pulling back to the 18 day MVA (52.74) before trying that level again but pulling back the last couple of sessions. BJ is now holding its 10 day MVA (53.36), working on an ascending wedge if it can hold support here. Relative strength has broken out ahead of price, a bullish sign, and there is strong money flow. Target on breakout: 62.
BUY POINT: 55 on volume of 900,000 (average 667,000; Friday up to 674,800). Stop: 51.15.
POSITION: Stock and/or September $50 calls to buy (BJ IJ).

MNC (Monaco--$28.95; -0.03; optionable): Forecast to announce a split on 7-26-01 in conjunction with earnings. At this time the company has not confirmed a time for the release.
http://biz.yahoo.com/p/m/mnc.html
BACKGROUND: Last announced a 3:2 split on 6-7-99 in conjunction with a board meeting. The stock price was $34.75. The annual shareholder meeting was on 5-17-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Automotive. Broke out of a large cup pattern last week (prior high 30.94 in August 1999), surging up to 33.20 with a great move before pulling back the last week. The stock has split several times in the 30's, and with a continuation of this move could be ready to announce again. Its lower-volume pullback came to rest Friday on the 10 day MVA (28.76) with a doji (however, volume still solid at 162,100 versus the average of 87,500), reaching down toward its 18 day at its low of 27.82. Looking for the stock to hold here, perhaps consolidating a bit in a handle, but we will also watch for a continuation of the strong move. Excellent buying.
BUY POINT: Aggressive: A bounce back over 30 on continued strong volume. Stop: 27.90.
POSITION: Stock and/or October $25 calls to buy (MNC JE - but very low open interest).

BEST PLAYS: Besides the plays set forth below as best plays, there are some other stocks that also look good. These include Pre-Announcements FITB, ELN, DFXI, NVDA and THQI; Pre-Split RAVN; Continuing Candidates CHBS and IGT; and Post-Splits ESRX and MTON.

PRE-ANNOUNCEMENT BEST PLAYS
1) BRO - Trying to break from its consolidation
2) PDII - Forecast for Wednesday
3) BMET - Forecast for Monday
4) KRB - Forecast for Tuesday
5) ATK - Still a put
6) ADVP - Looking like a put

BRO (Brown & Brown--$41.90; -0.84; no options): Forecast to announce a split on 7-12-01 in conjunction with earnings or on 7-25-01 in conjunction with a board meeting. At this time the company has not confirmed a time for the release of earnings and has not confirmed the date of the board meeting.
http://biz.yahoo.com/p/b/bro.html
BACKGROUND: Last announced a 2:1 split on 7-26-00 in conjunction with its regularly scheduled board meeting. The stock price was $48. The annual shareholder meeting was on 4-18-01 at which time authorized shares were increased.
STATUS: Insurance Brokers. After a huge move in April (high of 46.10) the stock pulled back and has formed a nice, tight, lateral consolidation along its 50 day MVA (40.74). It is trying to move up out of the consolidation and finish a saucer, and after a solid move Thursday the stock pulled back a bit Friday on lighter volume (38,200; average 37,000). Looking for it to hold the 10 day MVA (41.64) and then continue the push up as we go toward the forecast. Relative strength is solid, and the stock shows good money flow and buying. Target: 49.
BUY POINT: After holding the 10 day, a move back over 42.84 on increased volume. Stop: 39.84 (or just under the 50 day MVA).
POSITION: Stock only.

PDII (Professional Detailing--$84.19; -2.48; optionable): Business Services. Wildcard Forecast to announce a split on 7-11-01 with its annual shareholder meeting.
http://biz.yahoo.com/p/p/pdii.html
BACKGROUND: PDII has never split its stock. The annual shareholder meeting is scheduled for 7-11-01 at 10:30 am ET at which time additional shares will be authorized.
STATUS: Took a big drop from last November to February, and gradually showed strength by climbing back up steadily through May. It has since dropped back from that intermediate high of 97.83, finding support at 73 before making a strong move back up over the last couple of weeks. After hitting a high of 94 on the last run the stock has eased back, but dropped back through its 10 day MVA (86.34) Friday after showing a couple of dojis over that level. Volume eased back a bit to 171,000 (average 177,100), and the 50 day MVA is just below at 82.49. We will look for the stock to hold that support and make a solid move up going into the forecast; we can wait until the time of the shareholder meeting to get a solid entry point.
BUY POINT: Aggressive: After holding the 50 day, a bounce on increased volume going toward shareholder meeting. The safer play would be a bounce back over the 10 day MVA, but we might not get it before the announcement. Stop: 76.72.
POSITION: Stock and/or October $80 calls to buy (PKU JQ).

BMET (Biomet--$43.64; -1.49; optionable): Medical equipment. No announcement with the board meeting, but we are looking at 7-9-01 before the open with earnings.
http://biz.yahoo.com/p/b/bmet.html
BACKGROUND: Last announced a 3:2 split on 7-6-00 at a stock price of $29. The annual shareholder meeting was on 9-16-00 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: BMET has given us some great plays going toward the forecast, but has suffered the last few sessions, selling back and giving up support. Friday the stock continued down, crashing through the 50 day MVA (44.62). Not good, but we will see if the stock can make a rapid recovery, as strong stocks often do after a drop through the 50 day; moreover, the selling volume was not that strong Friday, coming in lower at 1.17 million (average 1.58 million). An announcement could be a catalyst for a solid move back up, although in this market environment we could be looking at a quick play. The 10 day MVA is potential resistance at 46.23, and the recent high is 49.18.
BUY POINT: Aggressive: On an announcement, a move back over the 50 day MVA on increased volume.
POSITION: Stock and/or October $40 calls to buy (BIQ JI).

KRB (MBNA Corp--$32.48; -1.02; optionable): Forecast to announce a split on 7-10-01 or 7-11-01 in conjunction with earnings; however, the company will not confirm the date and they do not make it public.
http://biz.yahoo.com/p/k/krb.html
BACKGROUND: Last announced a 3:2 split on 7-14-98 in conjunction with earnings. The stock price was $40. KRB is a holding company and does not hold annual shareholder meetings.
STATUS: Has taken a strong fall the past month from the 38 range, going the opposite direction of most banks. It dropped back again from its 10 day MVA (33.47) Friday, closing at recent lows. Going into earnings it is not looking promising at all for a play, and even with an announcement any upside move might not be significant. Without the company's disclosure of the time of the earnings announcement, we will have to watch and see if the stock makes a move. We will watch the action Monday, but it is now off of its usual split price.

ATK (Alliant Techsystems--$86.90; -0.60; optionable): Forecast to announce a split on 8-7-01 in conjunction with its annual shareholder meeting.
http://biz.yahoo.com/p/a/atk.html
BACKGROUND: Last announced a 2:1 split on 11-2-00 in conjunction with earnings. The stock price was $89. The annual shareholder meeting is scheduled for 8-7-01 at 2:00 pm CT at which time additional shares will be authorized.
STATUS: After a big drop (recent high at 101.24, 50 day MVA at 91.77), the stock found support in the 85 range, but its move up has met stout resistance at the 10 day MVA (88.28). The stock has tried that resistance twice this week, dropping back each time, and Friday showed a third consecutive doji on weak volume (72,600; average 174,000). Off of this pattern we will look for a continued drop back. On a drop we will watch the recent low at 84.10, and on a drop below that we are targeting 78-80.
BUY POINT: On a move below 86.50, perhaps after another test of the 10 day MVA, on average or better volume.
POSITION: August $95 puts to buy (ATK TS).

ADVP (Advancepcs--$58.93; -0.07; optionable): Health services. We are working on a date for this one.
http://biz.yahoo.com/p/a/advp.html
BACKGROUND: Last announced a 2 for 1 split on 10-12-99 at a stock price of $50. The annual shareholder meeting was on 12-7-00 at which time no additional shares were authorized. The company does not have sufficient shares for a 2 for 1 split, but does have sufficient shares for a 3 for 2 split.
STATUS: ADVP fell back below its 50 day MVA (60.00) on Thursday, continuing a drop started at the recent high of 65. Friday saw a doji, indicating a possible bounce back up toward the 50 day; we will see if it can recover, but we are watching for a failure of that move and strong selling back down. The May low was 54.57, and there is support at April lows (and highs in its former double bottom pattern) in the 50 range, which will be our initial target (200 day MVA at 47.49).
BUY POINT: After a failed test of the 50 day, selling back on above average volume (737,000; Friday 533,900).
POSITION: August $65 puts to buy (QVD TM).

PRE-SPLIT BEST PLAYS: Remember, we try to grab these as they break out of good patterns or as they start a run right before the split. Not looking for home runs, but looking for those $3 to $4 moves running into the split, watching for topping signs and potential resistance. Not huge money, but it can be very steady. We set our initial stops at the 7-8% range below the purchase price (or just below obvious support), and move them up on a move to preserve our profits.
1) HRB - Still testing the breakout
2) KG - Still a sound pattern
3) ING - Dropped to a doji on support

HRB (H&R Block--$66.69; +0.09; 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 Monday with a solid move. Since that time it has pulled back a bit to test the move, and Friday showed a doji comfortably over its 10 day MVA (65.58) and breakout point (65.50). Volume was down but continued to be strong at 710,000 (average 546,000). Looking for a move up off of this healthy pullback. The recent high is 69.60.
PLAY: A move up over 67.50 on continued strong volume, with stock and/or October $66 calls to buy (HRB JM).

KG (King Pharmaceuticals--$52.15; +0.25; optionable): Splits 4:3 on or about July 19.
http://biz.yahoo.com/p/k/kg.html
STATUS: Has pulled back from its break from a cup with handle (high of 57.88), and has leveled out a bit under its short-term MVA's (10 day at 53.03), but is still in the range of the lows in its former handle, above the 50 day MVA (49.96). Looking for a pre-split run that will take it back up toward the breakout high.
PLAY: On a move over the 10 day MVA on increased volume (1.14 million Friday, which is the average), stock and/or August $50 calls to buy (KG HJ).

ING (Ing Groep--$65.65; -0.60; optionable): Life Insurance. Splits 2:1 effective July 13.
http://biz.yahoo.com/p/i/ing.html
STATUS: ING made a nice move back over its 50 day MVA (65.37) and late June high of 66.06, but has pulled back and after a gap down Friday finds itself back on the 50 day. The pattern was a doji with sharply higher volume (at the average of 107,000), so we will look for a bounce up from here toward the recent high of 68.13. The 200 day MVA is also potential resistance at 68.97 (that level pushed the stock back down three times in April).
PLAY: A bounce over 66, with stock and/or August $60 calls to buy (but very low open interest).

CONTINUING CANDIDATE BEST PLAYS: Some puts in here.
1) ACF - Showing strength
2) CBH - Could be ready to move

ACF (Americredit--$54.40; +1.37; optionable): Credit Services.
http://biz.yahoo.com/p/a/acf.html
BACKGROUND: Last announced a 2 for 1 split on 8-18-98 at a stock price of $35. The annual shareholder meeting was on 11-7-00 at which time no authorized shares were increased. The company does not have sufficient shares for a 2 for 1 split, but does have sufficient shares for a 3:2 split.
STATUS: ACF made a nice move Friday, moving out of a small ascending wedge handle to a small cup pattern. It is not the best type of cup pattern, short and in a slight "v" shape, but the current action looks good, and relative strength has broken out. We are looking for the stock to break out over the recent highs. Target: 62-63.
BUY POINT: Breakout: Over 55 on volume of 1.35 million (up to 1.23 million Friday; average 1.04 million). Stop: 51.15.
POSITION: Stock and/or August $50 calls to buy (ACF HJ).

CBH (Commerce Bancorp--$70.27; -0.86; optionable):
http://biz.yahoo.com/p/c/cbh.html
BACKGROUND: Last announced a 5:4 split on 6-29-98. The stock price was $54.63. The annual shareholder meeting was on 6-20-00 at which time no additional shares were authorized. The company has insufficient shares for a 2:1 split.
STATUS: CBH is looking pretty good again, having recovered back over its 50 day MVA (68.33) a couple of weeks ago and now trying to make a move on its high (72.90). It has pulled laterally a bit this week, Friday dipping back but still holding strong over its 10 day MVA (70.09). Volume was up but remained below the average at 121,000 (average 148,500). Looking for it to hold here and generate a strong continuation of its move. Relative strength has broken out. Target on breakout: 80.
BUY POINT: Aggressive: Over this week's high of 71.70 on above average volume. Stop: 65.75. New high: 73.03 on volume of 225,000. Stop: 67.90.
POSITION: Aggressive: Stock and/or September $65 calls to buy (CBH IM). New high: Stock and/or September $70 calls to buy (CBH IN).

End Part 2 of 4

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