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Begin part 2 of 3
SUBSCRIBER QUESTIONS
Q. When you look at charts, do you prefer 3 month or 6 month charts? When you refer to a pattern, are you looking at a daily chart, hourly, other? Why do you use candlestick charting as opposed to other types like line or bar charts.
A. We look at charts from all different time frames: 1 year, 6 months, 3 months, 1 month because it keeps us from getting tunnel vision with respect to what has just recently happened. We need to put it all in the perspective of the big picture, but we also need to see the subtleties of the more recent moves. Looking at various time frames gives us the bigger picture. Sometimes you can find yourself focusing on the last two weeks, but when you back up, you see the stock is about to breakout of a base or is approaching resistance, etc. Looking at a longer term chart allows us to make a useful count of accumulation and distribution weeks, too, an important indicator that illustrates the character of institutional involvement in a stock.
As for patterns, it is important to note that whether you are looking at a daily chart, a weekly chart, or a 5-minute chart, the patterns are the same. When we are watching a stock during the day with a 5-minute interval, we look for the same type of pattern that we would look for when looking at a pattern that spans several days, weeks, months. When we see volume dry up as the trading range narrows, for example, it is a sign that the stock could be ready to break out to the upside, whether it's a pattern of weeks or just hours, or less.
We use Japanese candlestick charting because it gives us more information more quickly than other chart styles. When combined with volume and pattern, it's a powerful tool as it becomes a very accurate measure of a stock's momentum. Once one is comfortable with what these charts show, the momentum of a stock is revealed much more quickly. We like it especially with respect to helping determine when a stock may be turning up or down. Candlestick charts don't show different data from bar charts; they just show it in a way that is much clearer to see at a glance, and it is easier to see those momentum shifts.
We teach candlesticks in our seminar series and there are several good books. One of them is by Gregory Morris called 'Candlestick Charting Explained.' Another is 'Japanese Candlestick Charting Techniques' by Steve Nison.
THE PLAYS
In each report we prepare full write-ups for those that look ready to move. If the move has been made already we discuss the play in the summary table. The purpose is to focus on the next good movers. New pre-announcement plays are found in that section.
Good moves Friday: APOL; CYD; LOW
NEW PLAYS: This section includes new plays from all sections other than pre-announcements.
New Pre-Splits:
Play Date: 12/02/2003
UTSI (Utstarcom--$38.36; +1.29; optionable): Splits 2:1 on a date to be announced. Chinese wireless communications
http://biz.yahoo.com/p/u/utsi.html
STATUS: Test 50 day MVA. A current play but up solidly Friday on the best volume in two weeks. Looks as if it is going to resume the formation of its base after tapping down to 32 in November. Ready to add positions on another volume run from here.
Volume: 2.427M Avg Volume: 3.231M
BUY POINT: New: $39 Volume=4M Target=$44.55 Stop=$36.38
POSITION: UON BG - Feb. $35c (75 delta) &/or Stock
http://www.investmenthouse.com/cs/utsi.html
Leadership stocks: Maybe not ready for a split, but setting up well for an upside move.
Play Date: 01/03/2004
PRTL (Primus Telecom--$11.17; +1.01; optionable): Telecom: international and domestic, voice, internet and data services
http://biz.yahoo.com/p/p/prtl.html
STATUS: Cup. Moving toward the breakout from a 7 week base showing solid 2 to 0 accumulation (2 up price weeks on rising volume to 0 down price weeks on rising volume), Friday PRTL showed a solid shot of volume as it continued its move off the 50 day MVA (9.68). The base used that level as support, an indication that institutions are moving into the stock as they bought in at that key institutional support level. Excellent money flow moving up ahead of price and relative strength ready to breakout, an indication that the stock is outperforming the broader market.
Volume: 1.539M Avg Volume: 1.291M
BUY POINT: $11.35 Volume=1.9M Target=$13.65 Stop=$10.48
POSITION: PWU FB - June $10c (70 delta) &/or Stock
http://www.investmenthouse.com/cs/prtl.html
Play Date: 01/03/2004
VTIV (Ventiv Health--$9.36; +0.21; no options): Sales & marketing solutions for pharmaceutical industry
http://biz.yahoo.com/p/v/vtiv.html
STATUS: Ascending triangle. After a nice March through October run, VTIV has moved laterally the past six weeks. It is making higher and higher lows over the important 50 day MVA (8.48) while bumping into a more or less constant top at 9.55. The higher and higher lows crowding below that contstant top build pressure for the upside breakout; these patterns can show quite strong breakouts. Accumulation is an outstanding 4 to 0 in the pattern, and money flow is soaring. Excellent looking play ahead.
Volume: 111.107K Avg Volume: 158.772K
BUY POINT: $9.62 Volume=238K Target=$11.62 Stop=$8.95
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/vtiv.html
Continuing Leader Plays:
Play Date: 01/02/2004
CYD (China Yuchai--$32.22; +1.62; optionable): Chinese diesel engine maker
http://biz.yahoo.com/p/c/cyd.html
STATUS: Flat base. CYD is making its move up off of the bottom of its 8 week base that formed over the 50 day MVA (27.92). Solid 3 to 1 accumualtion in the pattern. Volume has surged as CYD moved up off the 50 day the past week. After drying up the prior three weeks, this shows that more and more big money is moving into the stock. We picked up some Friday and are looking for more on a continued move higher.
Volume: 5.51M Avg Volume: 2.984M
BUY POINT: $33.64 Volume=4M Target=$40.45 Stop=$31.29
POSITION: CYD EG - May $35c (56 delta) &/or Stock
http://www.investmenthouse.com/cs/cyd.html
Play Date: 12/18/2003
FALC (Falconstar Software--$9.15; +0.41; optionable): PC data storage devices
http://biz.yahoo.com/p/f/falc.html
STATUS: Cup w/handle. Started making the move Friday, rallying to 9.56 on the high before giving a chunc of the session's move back by the close. Still a nice gain on once again nice volume, and we are looking at a continued move here. Nice short 7 week base showing solid 3 to 1 accumulation with some excellent money flow and a relative strength breakout.
Volume: 382.409K Avg Volume: 218.318K
BUY POINT: New: $9.22 (orig. $8.58) Volume=300K Target=$10.35 Stop=$8.42
POSITION: XMQ EU - May $7.50c (73 delta) &/or Stock
http://www.investmenthouse.com/cs/falc.html
Play Date: 11/19/2003
PSSI (PSS World Medical--$12.2; +0.14; optionable): Wholesale medical equipment
http://biz.yahoo.com/p/p/pssi.html
STATUS: Testing the breakout. PSSI is making its second 10 day MVA (12.05) test after breakign out of a 14 week flat base in early December. Stocks typically make 4 to 5 runs up their short term MVA (the 10 and 18 day MVA) after a breakout, and these early tests are good poitns to pick up the stock or add to positions. A good mover for us thus far, we are looking to add to positiosn on a rebound from here on rising volume. A good poitn for new postiions as well.
Volume: 315.042K Avg Volume: 532.409K
BUY POINT: New: $12.38 (orig. $10.26) Volume=779K Target=New positions ($14; orig. positions: $12.95) Stop=$11.68
POSITION: PYQ EV - May $12.50c (50 delta) &/or Stock
http://www.investmenthouse.com/cs/pssi.html
Play Date: 12/30/2003
TMWD (Tumbleweed Communication--$7.96; -0.42; optionable): Internet software services
http://biz.yahoo.com/p/t/tmwd.html
STATUS: Test 50 day MVA (7.35). TMWD is in the process of forming a small, 5 week double bottom w/handle. It formed over the 50 day MVA, and after a strong volume bounce last week off of the 50 day it faded Friday on lower, below average volume, holding over the 10 day MVA (7.86) on the close. It couls spend another 2 or 3 sessions forming up the handle, but we are going to be ready to move in if it breaks higher. Solid 2 to 0 accumulation and money flow still rallying up ahead of the price.
Volume: 378.096K Avg Volume: 544.612K
BUY POINT: $8.42 Volume=880K Target=$10.15 Stop=$7.69
POSITION: MYQ CU - Mar. $7.50c (69 delta) &/or Stock
http://www.investmenthouse.com/cs/tmwd.html
Downside Plays:
Play Date: 12/10/2003
LOW (Lowes--$53.9; -1.49; optionable): Home improvement stores
http://biz.yahoo.com/p/l/low.html
STATUS: Put. After moving laterally between 54 and 56 the past three weeks, LOW gapped to the 50 day MVA (55.83) Friday and then rolled over on rising, average volume. It managed to hold some support at 54, but the higher volume rollover indicates it is ready to continue lower.
Volume: 3.268M Avg Volume: 3.337M
BUY POINT: $53.72 Volume=4M Target=$50.45 Stop=$54.75
POSITION: LOW NK - Feb. $55p (-58 delta)
http://www.investmenthouse.com/cs/low.html
PRE-ANNOUNCEMENT PLAYS
Current Pre-Announcement Plays: We will to look at the stocks in the best patterns for entry points moving into the potential split announcements. We are researching the next date on those that did not announce but are still very strong. Some companies are still gun-shy about announcing splits, but one of the things we love about split plays is that they involve market leaders that make us good money even if they do not announce.
ACV: Early January. Up to the simple 50 day MVA but volume was backing off.
APPB: 12-15-03. No announcement but looking solid in its range. Needs a breakout over 40.
APOL: 12-18-03 before the market opens. No announcement. Starting up off the 50 day MVA.
BCR: Forecast 1-27-04.
DE: Forecast 2-14-04. Continues stuck on the 18 day MVA.
DCOM: 1-17-04.
DNA: Forecast 1-14-04. Nice pullback to test the breakout.
GGG: Forecast 1-22-04.
LXK: Forecast 1-17-04.
MBG: Nice pullback. Researching new date.
MBT: Researching date. Volume is surging as it rallies to finish its base.
NSIT: Forecast 1-30-04.
OSI: Forecast 2-11-04. Testing the 18 day MVA after a nice break off of the 50 day.
SHFL: No split on 12-11-03. Showing a nice doji over the 18 day MVA.
SOV: Forecast 1-20-04 with earnings. Still working laterally below 24.
UOPX: No split on 12-18-03. Looking for UOPX to follow APOL's lead and start back up.
VAR: Researching new date. Volume edging up as it holds the short term MVA.
VIP: Researching date. Ready for a breakout test to enter positions.
XTO: Forecast 2-18-04 in conjunction with earnings. Very nice test of the 18 day MVA.
We are putting full write-ups of those pre-announcement stocks that are ready to make moves. As the other pre-announcement candidates reach new buy points we will put them on as well. We want to keep the report focused on those stocks ready to make moves.
New Pre-Announcement Plays:
Play Date: 01/03/2004
DNA (Genentech--$93.79; +0.22; optionable): Biotechnology. Forecast to announce a split on 1-14-04 after the market closes in conjunction with earnings.
BACKGROUND: Last announced a split on 10-5-00 in conjunction with a board meeting. The stock price was $172. Things were a bit wilder then, and now near $100 DNA is ready for another split. The annual shareholder meeting was on 4-23-03 at which time no additional shares were authorized. The company has sufficient shares for a 2 for 1 split.
http://biz.yahoo.com/p/d/dna.html
STATUS: Testing the 10 day MVA. DNA broke out of a 10 week cup w/handle base three weeks back and rallied to 95. It spent the past week edging back to the 10 day MVA (93) on lower volume to test that strong breakout. Now there is an interesting thing that happens to strong stocks when they break the $90 barrier: they tend to run toward 100. 100 acts as a magnet and then a barrier, but it usually can break that barrier after a bit of a pullback. Strong 4 to 1 accumulation in the prior base set up the foundation for this breakout and run. This is the first test of the breakout, and the fact it is holding much of the gain indicates it is going to be a nice run. Looking to pick it up from here on a higher volume bounce. Our initial target is $100, and we are using some options to make that play. We can also take some stock positions and then get some more after it tests the run to 100 and starts back up.
Volume: 1.257M Avg Volume: 2.399M
BUY POINT: $94.55 Volume=3M Target=$100 Stop=$92.88
POSITION: DNA CS - Mar. $95c (52 delta)
http://www.investmenthouse.com/cs/dna.html
Play Date: 01/03/2004
MBT (Mobile Telesys--$84.90; +2.10; optionable): Russian wireless communications
BACKGROUND: No splits in its past, and a foreign stock as well. That does not mean it won't split, but it is harder to predict. What we do like is the pattern and its leadership status; it can make us nice gains without announcing a split, and when it comes, all the better.
http://biz.yahoo.com/p/m/mbt.html
STATUS: Cup. MBT is surging off of the 50 day MVA (78.56) as it forms the right side of a 12 week cup base sporting solid 3 to 1 accumulation. Volume has surged the past two sessions as it made the move off the 50 day as money moved into foreign technology areas. MBT may form a handle at this stage as it reaches toward the early October high in the pattern (87.50) given that it has just moved over $5 in the past three sessions. We are willing to pick up some positions on a further move from here and then complete the buy when it comes back to form a handle and breaks out from there.
Volume: 288.1K Avg Volume: 275K
BUY POINT: $85.38 Volume=412K Target=$99.95 Stop=$82.25
POSITION: MBT FQ - June $85c (54 delta) &/or Stock
http://www.investmenthouse.com/cs/mbt.html
Play Date: 01/03/2004
VIP (Vimple Communication--$74.15; +0.65; optionable): More Russian wireless
BACKGROUND: No splits in its past, and a foreign stock as well. That does not mean it won't split, but it is harder to predict. What we do like is the pattern and its leadership status; it can make us nice gains without announcing a split, and when it comes, all the better.
http://biz.yahoo.com/p/v/vip.html
STATUS: Breakout. Wednesday VIP broke out from a 12 week base Wednesday on some very strong volume. Friday it paused on lower volume, showing a doji at VIP touched 75. It looks ripe for a quick pullback and then a resumption of the breakout move, a familiar pattern that repeats time and again. Outstanding 5 to 1 accumulation in the base with a relative strength breakout as well, an indication of the strength of the move. Looking for VIP to test back from here toward 72 and then rally. That is where we will look at moving into new positions.
Volume: 310.5K Avg Volume: 410.272K
BUY POINT: Test 72ish, then $72.62 Volume=615K Target=$85 Stop=$69.24
POSITION: VIP DN - Apr. $70c (72 delta) &/or Stock
http://www.investmenthouse.com/cs/vip.html
Continuing Pre-Announcement Plays:
Play Date: 12/01/2003
APOL (Apollo Group--$69.4; +1.59; optionable): Education and training. Forecast to announce a split in early January 2004 in conjunction with earnings. Researching the exact date as APOL bounces its earnings reports around.
BACKGROUND: Last announced a 3 for 2 split on 4-5-02 at a stock price of $34.50. The company has sufficient shares for a 2 for 1 split.
http://biz.yahoo.com/p/a/apol.html
STATUS: Test 50 day MVA. APOL surged in late November, but then all of that CECO BS hit the fan and it was caught in the downdraft as CECO plunged lower. APOL held the 50 day MVA (67.13) as a stronger stock should, an indication that the institutions were stepping in to buy it at 'bargain' prices. After a lateral move for three weeks volume started to edge back in last week and on Friday it jumped off the 18 day MVA (68.19) on strong, above average volume. The pullback had nothing to do with APOL, and now that it has held and is starting to recover we are looking at additional positions.
Volume: 2.573M Avg Volume: 2.08M
BUY POINT: $70.72 Volume=2.9M Target=$82 Stop=$67.12
POSITION: OAQ EN - May $70c (51 delta) &/or Stock
http://www.investmenthouse.com/cs/apol.html
Play Date: 12/17/2003
BCR (C.R. Bard--$81.56; +0.31; optionable): Medical instruments. Forecast to announce a split on 1-27-04 in conjunction with earnings. The company has not confirmed this date, but based upon our research this is the date for the announcement.
BACKGROUND: Last announced a 2 for 1 split on 7-13-88 at t stock price of $40. The annual shareholder meeting was on 4-16-03 at which time no additional shares were authorized. The company has sufficient shares for a 2 for 1 split.
http://biz.yahoo.com/p/b/bcr.html
STATUS: Reverse head and shoulders. Does not look as if BCR is going to make the test of 80 before it resumes its move. Indeed, it only made it back to the 10 day MVA (80.56) on the intraday lows last week before starting up Friday. Looks ready to conitinue the move.
Volume: 215.5K Avg Volume: 331.318K
BUY POINT: New: 81.77 (orig. $80.12) Volume=500K Target=$92.25 Stop=$79.66
POSITION: BCR DP - Apr. $80c (49 delta) &/or Stock
http://www.investmenthouse.com/cs/bcr.html
Play Date: 12/20/2003
GGG (Graco--$40.40; +0.30; optionable): Fluid management for industrial applications. Forecast to announce split on 1-22-04 in conjunction with earnings.
BACKGROUND: Last announced a 3 for 2 split on 5/6/02 at a stock price of $43.20. A regular splitter, Has announced 5 splits in the last 9 years.
http://biz.yahoo.com/p/g/ggg.html
STATUS: Testing the breakout. Friday GGG was running higher, hitting 41.03 on the high, but it was unable to garner any volume and gave back most of the gain. It continues to look solid in the handle to its 4 month base. Accumulation remains solid at 4 to 2, and we are just being patient, wanting to see more volume on the breakout move.
Volume: 69.8K Avg Volume: 126.727K
BUY POINT: $40.55 Volume=200K Target=$48.75 Stop=$39.42
POSITION: GGG EH - May $40c (56 delta) &/or Stock
http://www.investmenthouse.com/cs/ggg.html
Play Date: 11/18/2003
MBG (Mandalay Resort Group--$44.8; +0.08; optionable): Resorts & Casinos
BACKGROUND: Last announced splits in 1991 (2:1) and 1993 (3:2) at roughly $45. After the long downtrend this is the first time MBG has made it back to those levels.
http://biz.yahoo.com/p/m/mbg.html
STATUS: Testing the breakout. A very nice test of the breakout, holding the 10 day MVA (45.06) with a very nice, tight doji after a solid $4 run after the breakout. Solid 4 to 2 accumulation and money flow out ahead of the price. Very nice test and now want to see a strong volume surge as MBG moves back up.
Volume: 472.8K Avg Volume: 976.636K
BUY POINT: New: $45.28 (orig. $44.30) Volume=1.8M Target=$53 Stop=$44.54
POSITION: MBG CH - Mar. $40c (62 delta) &/or Stock
http://www.investmenthouse.com/cs/mbg.html
Play Date: 10/28/2003
VAR (Varian Medical Systems--$69.78; +0.68; optionable): Medical Equipment.
BACKGROUND: Last announced a 2 for1 split on 11-19-01 at a stock price of $70.20. The annual shareholder meeting was on 2-13-03 at which time no additional shares were authorized. The company has sufficient shares for a 2 for 1 split.
http://biz.yahoo.com/p/v/var.html
STATUS: Test breakout. VAR is working laterally the past month, holding roughly over the 18 day MVA (68.77) as it makes the sideways move on mostly below average volume. This move comes after a nice breakout in late October and rally up to 71. It has worked its way back up to the top of the range for the month. We are being patient and letting it work. Want to see strong volume on the move over 70.
Volume: 299.1K Avg Volume: 539.147K
BUY POINT: New: $70.45 (orig. $64.50) Volume=1.1M Target=$74.25 Stop=$68.64
POSITION: VAR EN - May $70c (53 delta) &/or Stock
http://www.investmenthouse.com/cs/var.html
POST-SPLIT
Play Date: 12/30/2003
EASI (Engineered Support--$55; -0.06; optionable): Aerospace/defense
http://biz.yahoo.com/p/e/easi.html
STATUS: Test 18 day MVA (55.31). Still in that test of its nice pre- and post-split run. EASI gapped higher Friday but could not hold the move, fading back to the 18 day MVA as volume edged higher though was still below average. Could not hold the move Friday, but still a nice, quiet pattern. Still watching for the break higher that holds, but want to see above average volume.
Volume: 327.012K Avg Volume: 313.136K
BUY POINT: $55.65 Volume=400K Target=$61 Stop=$54.88
POSITION: UFE EK - May $55c (56 delta) or UFE BK - Feb. $55c (54 delta)
http://www.investmenthouse.com/cs/easi.html
Play Date: 12/29/2003
HAR (Harman Intl.--$73; -0.98; optionable): High end electronic equipment
http://biz.yahoo.com/p/h/har.html
STATUS: Testing the 10 day MVA. After an explosive move higher Monday, HAR stalled some at 75 and eased back on very low volume Friday, holding well above the 10 day MVA (72.48) on the close. Looking for it to hold here and set up the next bounce. A strong stock that can run hard.
Volume: 225K Avg Volume: 597K
BUY POINT: New: $73.55 (orig. $73.25) Volume=400K Target=$80 Stop=$72.38
POSITION: HAR BN - Feb. $70c (64 delta) &/or Stock
http://www.investmenthouse.com/cs/har.html
End part 2 of 3
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