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Begin Part 2 of 2

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.

AZO exploded on the breakout. BSML made another strong move while MNC continues to consolidate. MVSN was hammered on what appears to be a false rumor.

Best Plays:
1) IRIC: Software should do well.
2) CPWR: Ditto.
3) FRX: Strong move.

New:

IRIC (Information Resources--$9.35; -0.07; no options): Software
http://biz.yahoo.com/p/b/bsml.html
STATUS: IRIC is in a tight lateral consolidation the past six weeks. It tried to breakout 8 sessions ago, but pulled right back into the consolidation. It has shown two above average volume spike the last three sessions (205,200; average is 138,136). Money flow is strong and it appears as if the stock is massing for a breakout in its long, long pattern. The software stocks may do very well tomorrow on the heels of MSFT.
BUY POINT: 9.75 on volume of 300,000 or better.
POSITION: Stock; no options.

http://www.investmenthouse.com/cd/iric.html

SPF (Standard Pacific--$23.15; +0.23; optionable): Residential construction
http://biz.yahoo.com/p/s/spf.html
STATUS: In an ascending wedge as it builds up toward the right side of its 6 month base, SPF has gradually pulled back toward the 18 day MVA (22.74) on very low volume (74,100; average is 397,545). Money flow is charging up ahead of the move. Target: 29
BUY POINT: 24.15 on volume of 400,000 or better. Stop: 22.45
POSITION: Stock and/or September $20 calls to buy (SPF ID; 51 OI).

http://www.investmenthouse.com/cd/spf.html

Updated:

CPWR (Compuware- -$12.65; +0.12; optionable): Application software
http://biz.yahoo.com/p/c/cpwr.html
STATUS: CPWR formed a beautiful cup and then dropped off pretty rapidly last week in just two sessions. That is not the best handle, but now it is moving higher on stronger volume (6.7 million; average is 3.762 million). Money flow is excellent, and the stock looks as if it wants to move higher toward a breakout. MSFT won't hurt it. The big question is whether we want to play up to 14 (the breakout) or take it from here. Target: 20
BUY POINT: Breakout: 14.12 on volume of 5.6 million. Stop: 13.13
POSITION: Stock and/or November 12.50 calls to buy (CWQ KV).

http://www.investmenthouse.com/cd/cpwr.html

SDS (Sungard Data--$29.74; -0.21; optionable): Business software
http://biz.yahoo.com/p/s/sds.html
STATUS: SDS split in the middle of June, rallied to 31, and has now pulled back to the 18 day MVA (29.54). Today it showed a doji on that level on a slight increase in volume (987,400; average is 897,045). The stock looks to be forming a reverse head and shoulders pattern (left shoulder in May, head in June, and the right should being formed now. Target: 36
BUY POINT: Breakout: 31.13 on volume of 1.25 million. Stop: 28.95. Bounce: over 30 on above average volume. Stop: 27.90
POSITION: Stock and/or October 25 calls to buy (SDS JE).

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.

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 we are still interested in: ADBE, SEBL, VRSN, VRTS

FRX (Forest Labs- -$74.12; +1.97; optionable): Drugs
http://biz.yahoo.com/p/f/frx.html
STATUS: Making a strong move up today, clearing the bottom of its 4-week consolidation on rising, above average volume (1.64 million; average is 1.24 million). Volume had been really quiet until today. Relative strength has already broken out on this move higher. Target: 90
BUY POINT: Aggressive: over 74.50 on continued strong volume. Stop: 69.25
POSITION: Stock and/or November $70 calls to buy (FRX KN).

http://www.investmenthouse.com/cd/frx.html

ADBE (Adobe): Keep an eye on ADBE. It closed below its 50 day MVA today at 42.50, but was back over that level easily after hours. It could really do well on the MSFT news, and could give us a roll up to 50 from here.

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.
LOW rallied but could not cross its 50 day MVA on rising volume. We will see what tomorrow brings as the market looks better.
BBBY: It recovered with a strong move.
ANF: Fell through the 50 day on strong volume.
CHS: That is more like it!

MEMBER PORTFOLIO: BRCM, CHKP, CSCO, EMLX, IDTI, INTC, JDSU, MVSN, NT, PWER, SUNW, VTSS

Still tabulating the survey, so if you have any further stocks you want covered, send them in! 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 ended its run of bucking the market, tanking below the 50 day MVA today.

MVSN (Macrovision--$62.64; -8.31; optionable (MVU): Media
http://biz.yahoo.com/p/m/mvsn.html
STATUS: Got stomped on a rumor that its CD encryption is not working well, but that was supposedly unfounded. It tapped its 200 day MVA on the low (59.41) and recovered. That puts it back at the point where it broke out of its trading range at 61. We think we will get a bounce, but have to see how the news shakes out.

http://www.investmenthouse.com/cd/mvsn.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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