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Begin Part 3 of 3

MOVING AVERAGE BOUNCES:

None this week.

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:

CRL (Charles River Labs--$31.90; -0.20; no options): Biotech
http://biz.yahoo.com/p/c/crl.html
STATUS: The stock is in an ascending wedge pattern, and after trying a breakout move Tuesday on strong volume, has dropped back to support (18 day MVA, 31.95) but volume was very low on the move Friday (58,400; avg. 196,000). The stock sold back Thursday, and granted, Friday's close was just under the moving average, but just above the 20 day MVA at 31.85 so we will look for a quick move back up from here. The closing price was hit twice back in June, which adds to current support. For a move up, look for a break over 35 on rising volume. Target: $42.
BUY POINT: Breakout: 35.13, on volume of 265,000 or better. Stop: 32.67 (just above the 10 day MVA, 32.36).
POSITION: Stock.

Pennant:

Continued: Watching RDK; it broke support but on low volume.

SLC (Sun Life--$23.20; -0.37; optionable (SLC): Insurance
http://biz.yahoo.com/p/s/slc.html
STATUS: Tried on Tuesday to break from its ascending wedge pattern (that formed after a cup with handle breakout) but pulled back on lower, below average volume the next 2 days (higher Friday at 129,400; avg. 183,363). The stock closed on top of its 18 day MVA (23.15), and we want a bounce here. The stock has previously broken this support, however, and can move through it toward the 50 day MVA (22.36); on that move we will look for a short term up trendline (22.80) to support a move back up. Still looks good.
Initial target: $29-30.
BUY POINT: Breakout: 24.48, on volume in the range of 250,000. Stop: 22.77. A buy on breakout up to 25.70.
POSITION: Stock and/or August $20 calls to buy (SLC HD).

BASING/TRADING RANGES:

Continued: Watching IVX for a strong move up from 36. Looking for a test of support from GSOF. WPI tested the 50 day MVA Friday so we are watching it for a move back up in its handle.

ORI (Old Republic--$29.01; +0.28; optionable (ORI): Insurance
http://biz.yahoo.com/p/o/ori.html
STATUS: Still in the flat base pattern that has formed the floor of a 6-month base (prior high 32). The stock got a nice shot of volume Friday (869,400; avg. 349,045) that brought it back up from a test of the 50 day MVA (28.51) and helped it break resistance at 29 (a price hit 12 times in the base that is sturdy resistance). A good move in a bad market. Still has other overhead supply, up to the pattern's high at 29.90. Like that move over 29, however, even if it is just a cent's worth. Good money flow and buying. Initial target: Previous basing high at 32.
BUY POINT: Breakout: 30, on minimum breakout volume of 471,000, or better. Stop: 27.93 (50 day MVA, 27.41).
POSITION: Stock and/or October $25 calls to buy (ORI JE; no open interests).

BZH (Beazer Homes--$63.98; -2.03; no options): Materials & Construction
http://biz.yahoo.com/p/b/bzh.html
STATUS: Has not made the buy point of 66.13 yet, though that isn't for not trying. The stock reached a high of 68 Thursday on strong volume, but closed lower then Friday dropped back to support at the 10 day MVA as volume shrank below average (127,100; avg. 185,000). We'd love to see a hold at that support, which is reinforced by that lateral consolidation at the end of June (the handle to the double bottom). Look for a bounce back. Super money flow and good buying, too. Target: $76-79.
BUY POINT: Aggressive: 64, on rising volume. Stop: 59.52 (50 day MVA, 58.81). Breakout: 68.13, on volume of 185,000 or better.
POSITION: Stock.

PMI (Pmi Group--$69.65; -0.84; optionable (PMI): Insurance
http://biz.yahoo.com/p/p/pmi.html
STATUS: PMI is finally settling down in the handle to its 8-month base (prior high 74.94); price slipped below the 18 day MVA (70.69) Tuesday, then drifted lower the rest of the week right along with volume (ending at 98,600; avg. 285,000). This is the kind of lower-volume pullback a handle should display. The low tapped support, but the stock can continue to the 50 day MVA (68.59) before the pullback is over. Target: $86-90.
BUY POINT: Aggressive: 71, on a sharp rise in volume. Stop: 66.03. Breakout: 74.63, on volume of 428,000 or better. Stop: 68.66 (50 day MVA, 68.59).
POSITION: Stock and/or September $70 calls to buy (PMI IN).

A thinly traded stock in a good-looking sector:

CPJ (Chateau Communities--$31.27; -0.03; no options): REIT
http://biz.yahoo.com/p/c/cpj.html
STATUS: Remains in the 6-month flat base that formed after the stock broke out of a similar base last fall. 31.40 is giving the stock a hard time (it opened there Friday), and we are looking for another test of the 10 day MVA (31.13) and bounce back on stronger volume (below average the last 4 days; avg. 50,000). The stock is showing strong money flow and buying, and we continue to look for a breakout. The April high is 32.18, but an aggressive position can be entered on a strong move over last Friday's high of 31.75. Target: $36.
BUY POINT: 31.88, on volume of 68,000 or better. Stop: 29.33 (just under the 200 day MVA, 29.68).
POSITION: Stock.

Continued plays: EFII closed just under its 50 day MVA, so we will watch it for a quick turn back up. Watching KEA and AVIR, the latter of which remains in the handle, but quite low. We are looking for a move up from the 200 day MVA.

JKHY (Jack Henry--$30.40; -0.34; optionable (JKQ): Software
http://biz.yahoo.com/p/j/jkhy.html
STATUS: The stock formed and ascending wedge in the upper right side of its 6-month cup base, and tried a breakout last week (reaching 31.50) but low volume prevented that. Instead, JKHY pulled back the last 2 days of the week on continued low volume (274,100 by Friday; average is 460,000), with Friday's low tapping the 10 day MVA (30.20). It is forming a handle, and can test the 18 day MVA at 29.73 before breaking out. Target: $38-40. Prior high in the base is 33.13.
BUY POINT: Breakout: 31.63, on volume of 690,000 or better. Stop: 29.42 (just below the 18 day MVA, 29.73).
POSITION: Stock and/or September $27.50 calls to buy (JKQ IY).

BVF (Biovail--$43.66; -0.82; optionable): Drug delivery.
http://biz.yahoo.com/p/b/bvf.html
STATUS: In the handle to its 4-month cup base. The 10 day MVA (43.37) continues to support this portion of the pattern, and volume dropped back to average levels (549,100; 587,000) on the pullback Friday. Will look for a move back up and breakout over the handle high of 45.10. Solid money flow. Target: $50-52.
BUY POINT: Breakout: 45.23, on volume of 880,000 or more. Stop: 41.61 (50 day MVA, 40.84).
POSITION: Stock and/or October $40 calls to buy (BVF JH).

LH (Laboratory Cp Am Hldgs--$77.50; -0.51; optionable (LH): Health services
http://biz.yahoo.com/p/l/lh.html
STATUS: Another stock in the handle to a cup base (of 6-months). Volume continued to fall further below average just as it has over the last month (to 245,800 Friday; avg. 476,000), and just as it should in a shakeout. Price has been more volatile in the handle, but is holding at the 10 day MVA for now. Looking for a strong move back up and a breakout. Strong money flow. Target on a breakout: $91-95.
BUY POINT: Breakout: 82.63, on volume of 714,000 or more. Stop: 76.02.
POSITION: Stock and/or August $75 calls to buy (LH HO).

EQR (Equity Resident--$56.49; -0.46; optionable (EQR): REIT
http://biz.yahoo.com/p/e/eqr.html
STATUS: Fell back to test the 18 day MVA (56.20) on the low Friday; volume was well below average for the third day; the stock was in a 2-day lateral movement after trying to break out of its handle but not getting volume when it needed it. Looking for a re-test of the 18 day MVA and bounce back toward a breakout over the handle high of 57.50. EQR is in a 6-month cup with handle. Strong money flow and buying. Target: $63-66.
BUY POINT: 57.63, on volume of 503,000 or more (Friday's volume 195,500; avg. 335,000). Stop: 53.60.
POSITION: Stock and/or October $55 calls to buy (EQR JK).

ASN (Archstone Comm--$25.58; +0.01; no options): REIT
http://biz.yahoo.com/p/a/asn.html
STATUS: In the handle of its 6-month cup base (part of a larger ranging pattern). Volume is quite low the last 3 days (though higher Friday at 182,500; avg. 505,000), dropping back down after some volatile action along with price in the previous week. The stock showed a doji a cent under its 18 day MVA after bouncing back up from a test of the 50 day MVA, and appears to have good support at 25. We are looking for a breakout over the handle high at 26. Solid money flow and good buying. Target: $30-31.
BUY POINT: 26.13, on volume of 758,000 or better. Stop: 24.30 (just under the 200 day MVA, 24.63).
POSITION: Stock.

CNA (Cna Financial--$39.00; -0.07; optionable (CNA): Insurance
http://biz.yahoo.com/p/c/cna.html
STATUS: Remains in the lengthy handle to the 11-month base. 39 is still supporting the stock in the pattern as volume remains below average overall (has been rather volatile in the handle). The stock showed a doji near the low of 38.90, and while we would like to see a hold here, it is possible that a test of the 50 day MVA (38.49) is necessary before the stock can head back up. Volume was up slightly to 113,800 (avg. 144,500). Target: $44-46.
BUY POINT: Breakout: 40.37, on volume of 217,000 or better. Stop: 37.54. A buy on the breakout up to 42.39.
POSITION: Stock and/or August $35 calls to buy (CNA HG; low open interests).

Puts: We are looking for a reflex bounce before we get too excited about chasing some puts, but here are some that look ready even now.

CHV (Chevron--$91.00; -0.32; optionable): Oil and gas
http://biz.yahoo.com/p/c/chv.html
STATUS: CHV has taken a hard fall with its sector. It took a relief bounce from the 88 level (200 day MVA at 87.41), but could not hold a move back over the 10 day MVA (91.76), falling back from that level Friday on lower, but continued solid volume (2.56 million; average 2.3 million). It rebounded from a low of 90.10 to close, but is a continued put play, with new positions if the stock tests the 10 day yet again and falls back. Our target is the 200 day.
BUY POINT: After another failed test of the 10 day, a drop back on continued solid volume.
POSITION: August $100 puts to buy (CHV TT).

IGT (International Game Technology--$59.20; -4.25; optionable):
http://biz.yahoo.com/p/i/igt.html
STATUS: IGT had an ugly day Friday, gapping down and then continuing to sell on big volume (1.62 million; average 776,200), taking out its 50 day MVA (60.25). IGT has made a very strong run over the last couple of years, and was looking pretty good here after a typical test of the 50 day a couple of weeks ago. However, this sharp drop signals a possible change in character, so we will see if it is able to recover back over the 50 day; if it cannot, we will look at a put play. The stock tapped support from its April high at its low of 58.25, and below that our initial target would be 54.
BUY POINT: After a bounce back up toward the 50 day that fails, selling back down below 58 on continued strong volume.
POSITION: August $70 puts to buy (IGT TM).

Good Investing!
Jon L. Johnson and 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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