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Begin part 2 of 3
SUBSCRIBER QUESTIONS
Q. Could you please describe in more detail what you mean by "money flow" in
your part 3 recommendations and where one can see this. Is this the technical indicator like "Chaikin Money Flow"that one sees on various charting programs? Keep up the good work. Once again, yours is the first email I go for each day, the most concise and relevant.
A. Thanks for the compliment on the report! The money flow indicator is a measurement of the net positive or negative level of money moving into or out of a stock, calculated using various proprietary methods of measuring the relationships between price and volume. Basically it is a way of determining whether there is, overall, money going into or out of a stock. While the indicator is closely related to institutional buying/selling, it differs because it refers to ALL money moving in and out of stock. Money flow indicators are found on most charting services and software; for the single indicator we use the TC2000 charting program's indicator 'money stream' which is the same thing. Money flow is not a primary, but a secondary, indicator. We use it to confirm or support analysis.
We also calculate money flow beyond using just the charting service measure, looking at many measures of money flow indicators, IBD accumulation tables, block trades and traditional 'money flow' formula calculations. We also look at flows into various types of stock funds and money market funds. With this compilation we generate our view on money flowing into a particular stock.
On the chart, the money flow indicator will track (over a chosen time period) this dynamic, but sometimes it can merely track the price up and down which isn't much of an indicator. It becomes useful, however, when we see either of the following: 1) money flow way up with price still in a base but ready to break out, tending to support our analysis of a solid pattern that presages a breakout; 2) price trying to hold at support but looking weak and money flow falling ahead of it, suggesting a potential move lower. We look for divergences, positive and negative. Positive divergences occur when money flow at the current price is higher than it was at an earlier, higher price. Similarly, negative divergence is when money flow is lower at the current price than it was at an earlier lower price.
If a rise in money flow concurs with other solid indicators, we really like seeing it. As a secondary indicator it can support analysis or let us know we may need to check that analysis again. Money flow can be useful, but we don't base buying or selling decisions on it.
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: ALTI; ASKJ; APA; BCR; MBG; OTEX; TUTS; XTO
NEW PLAYS: This section includes new plays from all sections other than pre-announcements.
New Pre-Split:
Play Date: 01/10/2004
NCEN (New Century Financial--$40.41; +1.6; optionable): Mortgage investment
http://biz.yahoo.com/p/n/ncen.html
STATUS: Ascending triangle. After a nice breakout in October NCEN has formed the current 9 week base, working up the 50 day MVA (37.23), using that as support. It has a constant top at roughly 40, building pressure from below as it works up toward that level. Volume surged Wednesday and Friday as NCEN made strong advances toward the breakout point. Excellent 4 to 1 accumulation (4 up price weeks on rising volume to 1 down price week on rising volume) in the base. Ready to make a breakout and is flexing its muscles some this past wee.
Volume: 1.558M Avg Volume: 932.772K
BUY POINT: $41.32 Volume=1.4M Target=$49 Stop=$38.43
POSITION: URE EH - May $40c (58 delta) &/or Stock
http://www.investmenthouse.com/cs/ncen.html
Leadership stocks: Maybe not ready for a split, but setting up well for an upside move.
Play Date: 01/10/2004
SNWL (Sonicwall--$8.37; +0.65; optionable): Internet software and services
http://biz.yahoo.com/p/s/snwl.html
STATUS: Flat base. After a solid run from April to October, SNWL has slipped into the current 11 week base, holding roughly over the 50 day MVA (7.70) as it works laterally. Volume has been very good, dropping off once the base started to mostly below average levels and then swelling sharply the last week as SNWL started to show signs it was ready to make a breakout move. Accumulation in the base is a solid 3 to 1. Money flow is surging as well. Friday SNWL jumped off the 50 day MVA (7.70) on once again surging volume. It cleared the highs in the base over 8.50, but could not hold that level. We want to see it do that again to enter positions.
Volume: 2.181M Avg Volume: 748.766K
BUY POINT: $8.54 Volume=1.1M Target=$10.25 Stop=$7.92
POSITION: UWL FU - June $7.50c (72 delta) &/or Stock
http://www.investmenthouse.com/cs/snwl.html
Play Date: 01/10/2004
SPIL (Siliconware Precision--$5.78; +0.3; no options): Chip equipment
http://biz.yahoo.com/p/s/spil.html
STATUS: Cup w/handle breakout. Friday SPIL announced its December revenues were up much better than expected and the stock shot higher on a tremendous volume surge. That move broke it out of a 9 week base sporting solid 4 to 2 accumulation. It gapped higher and closed off the intraday high (6.06) so we are going to look for it to fill the gap with a test of 5.50ish, and then catch it on the way back up. If it continues the run from here on strong volume without a test, we will take a partial position and then wait for that first test from a higher level to complete the buy.
Volume: 19.284M Avg Volume: 1.262M
BUY POINT: Test 5.50, then $5.84 on the way back up. Volume=1.9M Target=$7.35 Stop=$5.47
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/spil.html
Continuing Leader Plays:
Play Date: 01/06/2004
DGX (Quest Diagnostics--$73.07; +0.04; optionable): Medical labs
http://biz.yahoo.com/p/d/dgx.html
STATUS: Cup w/handle. Another lateral move Friday as DGX tapped the 10 day MVA on the low (72.49) and then recovered to continue the formation of a new handle on its new 5 week cup w/handle pattern that has formed right on top of the prior 4.5 month cup w/handle base. Volume continues to edge lower as the stock shakes out the last sellers. Accumulation remains strong at 5 to 2. Being patient and letting it make the breakout on strong trade.
Volume: 408.9K Avg Volume: 767.909K
BUY POINT: $73.88 Volume=1.2M Target=$84.85 Stop=$71.44
POSITION: DGX EN - May $70c (66 delta) &/or Stock
http://www.investmenthouse.com/cs/dgx.html
Play Date: 01/08/2004
EONC (Eon Communications--$3.94; -0.02; no options): Internet service provider
http://biz.yahoo.com/p/e/eonc.html
STATUS: Test 18 day MVA. Thursday EONC was trying the breakout on a strong volume surge, but Friday it stalled out as volume dried up. Still very solid. EONC broke out of a 12 week reverse head and shoulders in December, tested, and is ready to move back up. Excellent 6 to 1 accumulation (6 up price weeks on rising volume to 1 down price week on rising volume) in the base, setting the foundation for a good breakout and rally. Money flow is leading the way, and we are looking to pick it up on a move over 4.
Volume: 104.142K Avg Volume: 166.658K
BUY POINT: $4.09 Volume=240K Target=$5.12 Stop=$3.73
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/eonc.html
Play Date: 11/24/2003
GRMN (Garmin Ltd.--$57.3; -0.74; optionable): GPS devices
http://biz.yahoo.com/p/g/grmn.html
STATUS: Testing the breakout. After a powerful late October breakout from a 5 month cup base GRMN has surged up the 50 day MVA (52.88). Tuesday it jumped off the 18 day MVA (55.39), the lowest point of the recent pullback. Volume surged as it made the move and then faded back to end the week as the stock backed off slightly. Looking for it to test the 10 day MVA (56.14) on this pullback and then jump higher on volume for the next buy point.
Volume: 444.981K Avg Volume: 613.636K
BUY POINT: New: $58.12 (orig. $54.38) Volume=690K Target=New positions: $68 (orig. positions $62) Stop=$55.35
POSITION: GQR DK - Apr. $55c (50 delta) &/or Stock
http://www.investmenthouse.com/cs/grmn.html
Play Date: 12/08/2003
SFY (Swift Energy--$17.89; +0.51; no options): Independent oil and gas
http://biz.yahoo.com/p/s/sfy.html
STATUS: Breakout test. After a nice breakout in early December, SFY ran to 18 and has moved laterally, making higher lows up the 18 day MVA (17.10) as it builds up pressure under 18. It tapped toward the 18 day Thursday and then jumped off of that level Friday. Volume could have been better, however. Looking for a strong volume break over 18 for new positions.
Volume: 148.3K Avg Volume: 156.891K
BUY POINT: New: $18.12 (orig. $15.38) Volume=200K Target=New positions: $21.75 (orig. $18.55) Stop=$17.02
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/sfy.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: January 1-22-04 before the open. The annual shareholder meeting is on the same date.
APPB: Forecast 2-13-04 after the close.
APOL: Forecast 3-24-04 or with the 2-27-04 board meeting. Neither confirmed yet.
BCR: Forecast 1-27-04.
DE: Forecast 2-14-04.
DCOM: 1-17-04. Double topped at 32 and falling to the 50 day. Has to hold that level and give a strong bounce, but not looking solid moving toward earnings.
DNA: Forecast 1-14-04
GGG: Forecast 1-22-04.
LEA: Forecast 1-26-04
LXK: Forecast 1-17-04.
MBG: Researching new date.
MBT: Researching date.
MGAM: Forecast 1-28-04 before the open.
NSIT: Forecast 1-30-04.
OSI: Forecast 2-11-04. Back to the 50 day MVA.
RESP: Forecast 1-22-04 before the open.
SHFL: Forecast 2-19-04 with earnings.
SONC: Forecast 1-24-04 in conjunction with its shareholder meeting.
SOV: Forecast 1-20-04 with earnings.
UOPX: Forecast 3-24-03 with earnings.
VAR: Forecast 1-28-04 after the close or 2-19 in conjunction with its shareholder meeting.
VIP: Forecast 3-26-04.
VRTS: Forecast 1-20-03.
WFMI: Forecast 2-11-04.
XTO: Forecast 2-18-04 in conjunction with earnings.
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: 01/10/2004
LEA (Lear Corp.--$64.48; +1.78; optionable): Auto seats. Forecast to announce a split on 1-26-04 before the market opens in conjunction with earnings.
BACKGROUND: It does not appear that LEA has ever split its stock. The annual shareholder meeting was held on 5-8-03 at which time no additional shares were authorized. The company has sufficient shares for a 2 for 1 split.
http://biz.yahoo.com/p/l/lea.html
STATUS: Cup w/handle. LEA is making the breakout move from an 11 week base, surging Friday on the strongest volume in 3 months. Accumulation in the base is excellent at 4 to 1 indicating that money has been moving into the stock as it consolidated in the base. It also formed over the 50 day MVA (59.92), another indication of support for the stock. A nice move started last week, and we are looking to initiate positions on a further move on volume.
Volume: 864.7K Avg Volume: 453.227K
BUY POINT: $64.65 Volume=680K Target=$74.35 Stop=$62.45
POSITION: LEA FM - June $65c (52 delta) &/or Stock
http://www.investmenthouse.com/cs/lea.html
Play Date: 01/10/2004
MGAM (Multimedia Games--$47.01; +0.18; optionable): Gaming. Forecast to announce a split on 1-28-04 before the market opens in conjunction with earnings or on 2-2-04 in conjunction with the annual shareholder meeting.
BACKGROUND: Last announced a 3 for 2 split on 1-14-02 in conjunction with a board meeting. The stock price was $36.5. The annual shareholder meeting is scheduled for 2-2-04 at 9:30 a.m. Additional shares will be authorized. The company has sufficient shares for a 2 for 1 split.
http://biz.yahoo.com/p/m/mgam.html
STATUS: Breakout. A hot sector of late. MGAM participated in the gaming breakout toward the end of last week, moving out of an 8 week reverse head and shoulders parttern on an above average volume surge. The pattern formed after a big break higher in September that ran MGAM up to 45. It then paused to consolidate in this base; the accumulation in the base is 3 to 1 showing that buyers moved into the stock as it worked off the gains. Money flow is excellent, moving up ahead of price and relative strength is ready for the breakout as well, a further indication of the stock's strength. Friday it could not further the Thursday breakout, and we are looking for a test of 45ish before it starts back up. After that test that is where we pick it up.
Volume: 625.9K Avg Volume: 575K
BUY POINT: Test 45ish, then $46.25 on the way back up. Volume=862K Target=$53.18 Stop=$43.55
POSITION: QMG DI - Apr. $45c (63 delta) &/or Stock
http://www.investmenthouse.com/cs/mgam.html
Play Date: 01/10/2004
SONC (Sonic Corp.--$33.44; -0.76; optionable): Forecast to announce a split January 24 in conjunction with its annual shareholder meeting at 1:30 p.m. CT.
BACKGROUND: SONC last announced a 3:2 split 1-17-02 at its annual shareholder meeting with a stock price of $36.30. A frequent splitter announce roughly every 2 years.
http://biz.yahoo.com/p/s/sonc.html
STATUS: Testing the breakout. Broke from a 7 month cup with handle in mid-November and rallied to 32. The mad cow scare hurt it some, sending it back to the 50 day MVA (30.28) in late December. It held, and then Tuesday SONC announced solid earnings, sending it rocketing up to 34. It spent the next three sessions easing back and testing the move on lower volume. Excellent money flow helped lead the way higher. Looking for it to test back further toward the 10 day MVA (32.45) and tehn rebound on stronger trade for entry points.
Volume: 391.3K Avg Volume: 375K
BUY POINT: Test toward 32.50, then $32.62 on the way back up. If it turns from the Friday close we will take some positions. Volume=562K Target=$39.15 Stop=$31.55
POSITION: ZSQ FF - June $30c (80 delta) &/or Stock
http://www.investmenthouse.com/cs/sonc.html
Continuing Pre-Announcement Plays:
Play Date: 12/01/2003
APOL (Apollo Group--$70.84; 0.00; optionable): Education and training. Forecast to announce a split on 2-27-04 with a board meeting or on 3-24-04 in conjunction with earnings.
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: Cup w/handle. APOL continues to form the handle to a very short 5 week base that formed over the 50 day MVA (67.86) on the heels of the CECO allegations that it padded its enrollment. APOL has eased back to the 10 day MVA (70.16), tapping at that level on the lows and rebounding on the close. Positive 2:1 accumulation in the base. Looking for a strong surge over 72 for the next entry point in this long term market leader.
Volume: 1.036M Avg Volume: 2.057M
BUY POINT: New: $72.42 (orig. $70.72) Volume=2.9M Target=$82 Stop=$69.32
POSITION: OAQ EN - Feb. $70c (58 delta) &/or Stock
http://www.investmenthouse.com/cs/apol.html
Play Date: 12/13/2003
SOV (Sovereign Bancorp--$24.08; -0.09; optionable): Savings & Loan. Forecast to announce a split on 1-20-04 with earnings.
BACGROUND: SOV was a frequent splitter back in the late 1990's, announcing three 6:5 splits in 97 and 98 before it sank into a deep correction in 1999 that lasted until 2002. It is now back up to those old prices.
http://biz.yahoo.com/p/s/sov.html
STATUS: Testing the breakout. SOV jumped Tuesday on strong volume and looked to be making the breakout move from its 9 week base. It immediately faded on lower, below average volume, testing back to the 10 day MVA (23.88) on the intraday low, showing a nice, tight doji. That can indicate it is ready to move back up. Solid 3 to 1 accumulation in the short pattern with surging money flow leading the way. Looks ready to resume the breakout move, and that is where new buys can be made.
Volume: 1.753M Avg Volume: 2.004M
BUY POINT: New: $24.78 (orig. $24.37) Volume=2.7M Target=$29.12 Stop=$23.48
POSITION: SOV DX - Apr. $22.50c (71 delta) &/or Stock
http://www.investmenthouse.com/cs/sov.html
Play Date: 12/29/2003
SYK (Stryker--$84.40; +0.10; optionable): Medical instruments. Forecast to announce a split on 1-29-04 after the market closes in conjunction with earnings.
BACKGROUND: Last announced a 2 for 1 split on 4-19-00 at a stock price of $73.
The annual shareholder meeting was held on 4-22-03 no additional shares will be authorized. The company has sufficient shares for a 2 for 1 split.
http://biz.yahoo.com/p/s/syk.html
STATUS: Testing breakout. Still making the test, holding over the 10 day MVA (84.08) on the low and posting a modest gain on the close. SYK broke out of a 9 week triangle two weeks back and is testing that move. Strong money flow and volume is edging higher again. Want to see that high volume move to enter.
Volume: 487.4K Avg Volume: 496.318K
BUY POINT: New: $84.88 (orig. $84.55) Volume=745K Target=$97.35 Stop=$83.32
POSITION: SYK CQ - Mar. $85c (47 delta) &/or Stock
http://www.investmenthouse.com/cs/syk.html
Play Date: 11/03/2003
UOPX (University of Phoenix Online--$75.44; -0.3; optionable): Online education. Forecast to announce a split on 2-27-04 with a board meeting or on 3-24-04 with earnings.
BACKGROUND: Last announced a 4 for 3 split on 4-5-02 at a stock price of $38.95. The company has sufficient shares for a 2 for 1 split.
http://biz.yahoo.com/p/u/uopx.html
STATUS: Cup w/handle. A very nice handle is being formed as UOPX moves laterally over 75 in a very narrow range. This is good action t to put the finishing touches on its 5 week base showing some solid 2 to 1 accumulation. Just being patient and letting it finish the base. It can run like the wind when it gets started. It was on a great run in early December when the CECO allegations hit. It has recovered, and a breakout sends it on the next leg in its rise. As with APOL, UOPX has been a continual market winner.
Volume: 186.422K Avg Volume: 313.818K
BUY POINT: New: $76.94 (orig. $71.12) Volume=315K Target=$84 Stop=$72.28
POSITION: UBY CO - Mar. $75c (45 delta) &/or Stock
http://www.investmenthouse.com/cs/uopx.html
Play Date: 10/28/2003
VAR (Varian Medical Systems--$69.86; +0.58; optionable): Forecast to announce a split on 1-28-04 after the close with earnings or on 2-19 11-17-03 in conjunction with a board meeting. The company did not confirm this date, but based upon our research this is the date for the meeting.
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: Testing the breakout. Still working laterally over the 50 day MVA (67.15) Friday as volume edged higher and VAR made a run at breaking over near resistance at 70. This move is consolidating the October breakout and run from a 3 month base. Volume continues to improve as it works toward the breakout over 70, an indication that money is moving in. Looks solid and just need to see that stronger trade on the move over 70.
Volume: 555.4K Avg Volume: 538.669K
BUY POINT: New: 70.12 (orig. $64.50) Volume=1.1M Target=New positions: $80 (orig. positions $74.25) Stop=$68.64
POSITION: VAR EN - May $70c (50 delta) &/or Stock
http://www.investmenthouse.com/cs/var.html
End part 2 of 3
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