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Begin Part 2 of 2

BEST PLAYS:

Best Plays:
1) ITMN: Looking to breakout
2) PLA: Nice pullback to support
3) SRZ: Broke from its cup with handle
4) SLVN: Very powerful move
5) UNFI: Solid move toward the breakout
6) HB: Nice, tight pattern
7) RE: Good-looking handle
8) CRL: Trying to move out of its ascending wedge
9) SLC: Ready to break
10) AMAT: Doji under resistance looks like a put

NEW PLAYS:

CHTR (Charter Communications--$23.75; +0.50; optionable): Cable TV
http://biz.yahoo.com/p/c/chtr.html
STATUS: Moving in a 7 months flat base, CHTR is riding its 50 day MVA higher now, and it looks as if it wants to make a breakout after trying to do so early in July. Volume has been below average for the past month and one-half, but it was higher Friday on the move up, almost bumping average (4.31 million; average is 4.33 million). Excellent relative strength and very good price/volume action. Initial target: 30 (20% gain).
BUY POINT: 24.50 on volume of 6 million. Stop: 22.78.
POSITION: Stock and/or October 20 calls to buy (CUJ JD).

ITMN (Intermune--$39.76; +1.71; optionable): Drug manufacturer.
http://biz.yahoo.com/p/i/itmn.html
STATUS: In a six-month cup with handle, the handle itself forming a 'v-shaped' cup over the last seven weeks. After testing 30 the stock rebounded back over its 50 and 200 day MVA's (35 & 36.93, respectively), Friday making a strong move up out of its recent lateral range. Volume was excellent on the move (1.15 million; average 386,000) as the stock moved closer to the handle high of 42.07. We will look for a continued move and ultimately a breakout. Relative strength has already broken out, which is a bullish indicator, and the stock shows excellent money flow and buying. Target on breakout: 48.
BUY POINT: Aggressive: Over 40.20 on continued strong volume. Stop: 37.39. Breakout: 42.20 on minimum volume of 578,000. Stop: 39.25.
POSITION: Aggressive: Stock and/or October $35 calls to buy (IQY JG). Breakout: Stock and/or October $40 calls to buy (IQY JH - low open interest).

ATVI (Activision--$38.60; +2.24; optionable): Computer software.
http://biz.yahoo.com/p/a/atvi.html
STATUS: The stock has made a steady climb since the beginning of the year, but after hitting a high of 41.15 it has pulled back twice to find support near its 50 day MVA (34.10), forming a pennant pattern. The stock made a solid move up Friday from its short-term MVA's (10 day at 36.92), although volume was a bit weak on the move (up to 819,900; average 951,000). For a continuation of this move, we want to see it take out its recent closing high at high at 39.25 with more volume behind it. The stock shows strong money flow and buying. Target on breakout: 47.
BUY POINT: Aggressive: Over 39.25 with above average volume. Stop: 36.50. Breakout: 41.27 on volume of 1.28 million. Stop: 38.38.
POSITION: Both buy points: Stock and/or November $35 calls to buy (AQV KG - under 100 open interests).

TMK (Torchmark--$40.91; +0.48; optionable): Insurance.
http://biz.yahoo.com/p/t/tmk.html
STATUS: The stock fell out of a cup with handle in April but managed to form another cup with handle off of that pattern, from which it has had a more successful breakout. It recently pulled back into another handle-type consolidation, and it broke out Friday, although volume remained low at 238,000 (average 408,000). It is up again the all-time high, which is also the high in the left side of the original cup pattern (December 2000, at 41.19), and the overall pattern is similar to an ascending wedge. Whatever you call it, we are looking for more volume on a breakout to a new high. Target: 47.
BUY POINT: 41.32 on volume of 550,000. Stop: 38.43.
POSITION: Stock and/or November $35 options to buy (TMK KG).

PLA (Playboy--$17.85; -0.08): Publishing.
http://biz.yahoo.com/p/p/pla.html
STATUS: Has made a couple of massive breakouts, the first in May from a double bottom with handle, the second from a lateral consolidation formed after that move. The recent breakout hit 19.75, but has pulled back from there, show an orderly drop on generally decreasing volume (Friday down to 30,500; average 63,800). The stock is looking to hold support at its 10 day MVA (17.80), showing a tight doji there Friday, so we are looking for a bounce back up. The initial target is the recent high.
BUY POINT: A bounce over 18 on increased volume near the average. Stop: 16.74 (or just under the 18 day MVA (17.27).
POSITION: Stock and/or September $15 calls to buy (PLA IC).

BTGC (Bio-Technology--$12.14; -0.06; optionable): Drugs.
http://biz.yahoo.com/p/b/btgc.html
STATUS: In an 11-month cup with handle pattern inside an even larger base, with the handle forming a pennant since hitting a recent high of 13.57 in early June. It has leveled into a consolidation the last week just under its short-term MVA's (18 day at 12.26; 50 day is below at 11.43), with volume consistently low (Friday at 255,000; average 746,400). A nice pattern, and showing good relative strength and excellent money flow, so we will look for a breakout. The most recent high in the pattern is 13.20. Target: 15.50-16.
BUY POINT: Aggressive: A move over 12.50 with increased volume near the average. Stop: 11.63 (or just below the 50 day MVA). Breakout: 13.70 on volume of 1 million. Stop: 12.74.
POSITION: Aggressive: Stock and/or October $10 calls to buy (QTG JB). Breakout: Stock and/or October $12.50 calls to buy (QTG JV).

CONTINUED PLAYS:

BREAKOUTS:

SRZ (Sunrise Assisted Living--$28.81; +1.55; optionable): Long-term health care
http://biz.yahoo.com/p/s/srz.html
STATUS: SRZ broke out Friday, moving out of the handle to its 7 month cup with handle base. The handle formed over the support of its 10 day MVA (27.25), and set up nicely with very low volume as the stock showed numerous doji patterns. Friday's breakout move was accompanied by good breakout volume (348,200; average 230,300). It is still a buy up to 29.40. Target: 34.
BUY POINT: A move over 29.15 (a buy up to 29.40) on continued strong volume. Stop: 27.11.
POSITION: Stock and/or October $25 calls to buy (SRZ JE).

LH (Laboratory Cp Am Hldgs--$83.98; +2.67; optionable (LH): Health services
http://biz.yahoo.com/p/l/lh.html
STATUS: After its recent split, LH has held on nicely in a handle to the cup that has been forming since the beginning of the year. Within the handle, the stock has pulled back to test its 50 day MVA (74.97) in late June, and since has pushed up along its short-term MVA's (18 day at 78.18), seeing resistance at the handle high of 82.50. Friday the stock cleared that hurdle, breaking out on above average volume of 627,200 (average 477,900). Still a buy up to 86.63. We are looking for another move up on increased volume. Relative strength and money flow are excellent. Target: 96.
PLAY: Continued breakout move: 84.50 on increased volume (we were looking for breakout volume of 1.5 times the average, or 716,000), with stock and/or August $80 calls to buy (LH HP). Stop: 78.60.

SLVN (Sylvan Learning--$26.39; +1.64; optionable): Education services.
http://biz.yahoo.com/p/s/slvn.html
STATUS: Broke from a cup in late June, and after hitting a high of 25.58 the stock pulled back to test the former highs in that cup pattern, showing a bit of volatility along the way. It made a solid breakout Friday, on huge volume of 1.31 million (average 393,900). Approaching the edge of the 5% range (we do not like to chase a breakout 5% beyond the pivot), but still a buy up to 26.85. Target: 28.
BUY POINT: Still a buy up to 26.85.
POSITION: Stock and/or November $22.50 calls to buy (NQV KX).

GMST (Gemstar--$45.68; -0.34; optionable):
http://biz.yahoo.com/p/g/gmst.html
STATUS: Has been moving in a rolling range the past three months, but has made higher lows its last two trips down, holding to its short-term MVA's (10 & 18 day at 43.12 and 41.95, respectively; prior range lows near 35). The stock broke out Thursday, surging up and nearly tapping the 200 day MVA (46.73), before pulling back slightly to close on continuing high volume (5 million, average 3.5 million). Friday it could not sustain the move. Although the stock briefly broke through the 200 day, it pulled back to end the week with a star doji on significantly lower, below average volume (2.12 million). The doji may indicate that the stock is simply resting, gearing up to break through the 200 day next week. Or it may indicate another test of the 10 day before it moves up again. Money flow and buying remain strong. Target: 52.
BUY POINT: 47.08 on average or better volume. Stop: 43.78.
POSITION: Stock and/or November $45 calls to buy (QLF KH).

ALTR (Altera--$31.16; -1.72; optionable): Electronics.
http://biz.yahoo.com/p/a/altr.html
STATUS: A big breakout Thursday out of its recent, rolling range (between, roughly, 24 and 30), but Friday the stock pulled back immediately not what we like to see on a breakout. However, it is still holding support at pattern highs and volume, though strong, was still lower than on Thursday's move (11.3 million; average 7.5 million). We will see if the stock can hold pattern highs at 30-31 with a lower volume drop (200 day MVA at 28.78). Target: 35.
BUY POINT: A move back over 31.25 after a lower volume test of the 30 range. Stop: 29.06.
POSITION: Stock and/or September $25 calls to buy (LTQ IE).

OPMR (Optimal Robotics--$38.75; -1.00; optionable): Computer software.
http://biz.yahoo.com/p/o/opmr.html
STATUS: Thursday OPMR gapped up to break out of its handle (to a large cup dating back to February) on big volume, but could only show a doji. It followed up Friday by gapping up and then pulling back on low volume (170,500; average 306,400). Not the type of action we like on a breakout, but it is holding near handle highs and the high in the left side of the cup. The stock may hold support here, or may pull back a bit more to back to test the 10 day MVA (37.77). If the stock holds support, we are looking for another strong move up, again on strong volume. Target is 46.
BUY POINT: After a test of the handle highs or 10 day, a move to 40.47 on volume of 450,000. Stop: 37.67.
POSITION: Stock and/or October $35 calls to buy (OQG JG).

UNFI (United Natural Foods--$21.75; +0.75; no options): Food wholesale
http://biz.yahoo.com/p/u/unfi.html
STATUS: A cup with handle dating back to January, the stock is in its third handle pattern since early May. After testing support at the short-term MVA's, (10 day 20.77, 18 day 20.26), Friday the stock hit the buy point, but pulled back to close just under the prior handle high. Volume was strong, at 276,800 (average is 182,200). From here we are looking for more strength and a breakout. The high is 21.99. Target: $23-24.
BUY POINT: 22.25 on continued strong volume. Stop: 20.69.
POSITION: Stock.

TESTS OF THE BREAKOUT: Some of these stocks are moving back on low volume to test the breakout. We often take profits on option plays when they start to pullback on the breakout move and then get back in when the stock bounces up off of the breakout point. This second move is where some of the biggest gains are made.

PDCO (Patterson Dental--$35.28; -0.57; optionable): Wholesale equipment.
http://biz.yahoo.com/p/p/pdco.html
STATUS: Made a huge breakout move Tuesday, but closed well off of its intraday high. That move was followed by a 'star' doji on significantly lower volume, two consecutive topping signs. Thursday and Friday gave us lower volume pullbacks (Friday volume 221,800, average 219,600) to hold support at the 35 level. From here, we are looking for it to continue to hold support, before moving back up on average or stronger volume. Target: 41.
BUY POINT: Pullback: A strong move back over 35.50 on increased volume after a lower-volume pullback holding the 35-36 range. Stop: 33.
POSITION: Stock and/or October $30 calls to buy (DOU JF - very low open interest).

ELON (Echelon--$27.43; +0.72; optionable (EUL): Software
http://biz.yahoo.com/p/e/elon.html
STATUS: Continuing to test its breakout from the ascending wedge (that formed after the stock broke out of a cup with handle at the bottom of its 15-month base). The stock is showing some volatility after Tuesday's selling, gapping up on Thursday, only to gap significantly down Friday, all on above average volume (Thursday 535,800, Friday 510,200, average 357.400). The 18 day continues to provide some support, but we are watching the churning carefully, looking for it to settle down as we watch for a strong move back up to the breakout high of 32. Target: $35.
BUY POINT: Aggressive: 30, on continued strong volume. Stop: 27.90.
POSITION: Stock and/or November $25 calls to buy (EUL KE).

HB (Hillenbrand--$57.48; -0.01; optionable (HB): Diversified services
http://biz.yahoo.com/p/h/hb.html
STATUS: Riding along its 10 day MVA (57.31), and moving into the tip of an ascending wedge that began forming in June. Friday HB showed us its fourth consecutive, tight doji. It has reached several times up to the 58.50 range, but has not been able to crack through. Money flow is still huge, and the consolidation is looking good. We are looking for a breakout move, with a target of 65.
BUY POINT: 58.64, on continued strong volume (down to 163,600 today; average 131,800). Stop: 54.53.
POSITION: Stock and/or September $55 calls to buy (HB IK).

RE (Everest Re Group--$72.68; -0.01; optionable (RE): Insurance
http://biz.yahoo.com/p/r/re.html
STATUS: Continuing to pull back from a late June breakout off of a 6-month base (breakout high 75.50). The pullback has been orderly and on low volume, with a series of dojis generally holding over the 18 day MVA (71.88). Friday's doji closed over the 10 day (72.36), on below average volume (159,200, average is 278,200). We are looking for these dojis to trigger a run back up. Target: $82-85.
BUY POINT: Aggressive: A move over 73.30, on average or better volume. Stop: 68.17 (50 day MVA at 69.13). Breakout: 75.83, on volume in the range of 300,000. Stop: 70.34.
POSITION: Both buy points: Stock and/or October $70 calls to buy (RE JN).

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--$33.95; +1.85; no options): Biotech
http://biz.yahoo.com/p/c/crl.html
STATUS: A very strong move Friday took CRL back up toward the highs in its ascending wedge. The stock hit our aggressive buy point at 34, making a high of 35.05 before pulling back. Volume was very strong sat 634,600 (average 210,700), so we will look for a continued move to breakout. Target: $42.
BUY POINT: Breakout: 35.13, on minimum volume of 285,000 or better. Stop: 32.67.
POSITION: Stock.

SPF (Standard Pacific--$23.56; -0.51; optionable): Residential construction
http://biz.yahoo.com/p/s/spf.html
STATUS: After hitting an all-time high in February at 33, SPF split 'the hard way,' dropping to 16 before rebounding. It is working on a cup base, forming an ascending wedge over the past two months as it cleared its moving averages, and now showing us a promising consolidation pattern. It made a strong move up Thursday but pulled back a bit Friday on volume back in the very low range we have seen (95,700; average 301,600), holding the 10 day MVA (23.31). Looking for it to hold the 10 day and then give us a sharp breakout move. We will take our 20% and bank it if it starts to slow down on the move. Target: 29
BUY POINT: 24.20 on volume of 400,000 shares or better. Stop: 22.50
POSTION: Stock and/or September $20 calls to buy (SPF ID).

SLC (Sun Life--$24.05; +0.02; optionable (SLC): Insurance
http://biz.yahoo.com/p/s/slc.html
STATUS: Continuing its ascending wedge pattern (that formed after a cup with handle breakout) as it bounces up along its 10 day MVA (23.67) on below average volume (way down to 75,100 Friday; average is 185,000). We are still watching for greater volume on a breakout over the pattern high of 24.35. Relative strength has broken out. 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:

COTT (Cott Corp--$11.26; -0.04; no options): Beverages.
http://biz.yahoo.com/p/c/cott.html
STATUS: The stock broke from a double bottom with handle in June, completing its cup pattern, then pulled back into a handle to that cup. It has been moving in a tight, lateral consolidation over its 10 day MVA (11.23), but its attempts to try and move out have been hampered by weak volume. The last two sessions the stock has shown dojis on very light volume (up to 43,500 Friday; average 189,600). A decent pattern but the gradual moves up on low volume were not the best action in a handle, so we will see if the settling down with these last couple of dojis provides a springboard. Looking for a strong breakout over the handle high of 11.74. Target: 14.
BUY POINT: 11.87 on volume of 285,000. Stop: 11.03.
POSITION: Stock only.

IHI (Information Holdings--$33.75; +0.51; no options): Book publisher
http://biz.yahoo.com/p/i/ihi.html
STATUS: In 8-month cup with handle base. It formed a nice handle over the past week but made an attempt to break out Friday, hitting the pivot point (high of 34) with breakout volume (75,400; average 53,000) but settling back to close. The candlestick shows a loose star doji, so we could get a pullback to test the 10 day MVA (32.33) before a move back up, but we will continue to watch for the breakout from here. Target: 41
BUY POINT: 34.38 on continued strong volume of at least 76,000. Stop: 31.97.
POSITION: Stock only; no option chain.

CPS (Choicepoint--$41.85; -0.49; no options): Business services.
http://biz.yahoo.com/p/o/ops.html
STATUS: Has pulled into another handle to its cup pattern, which started to form at the beginning of January. It has been steadily trending up the right side of its base along its short-term MVA's (10 & 18 day at 42.28 and 41.92, respectively). Friday the stock again dipped back below the 18 day (low of 41.45), but recovered a bit to close as volume on the selling intensified (189,300; average 150,800). The increased volume on the drop is not what we like, so we will see if the stock can hold here and make a strong move back up in the handle (high of 43.62). Excellent money flow and relative strength. Target: 50.
BUY POINT: Breakout: 43.75 on volume of 225,000. Stop: 40.70.
POSITION: Stock.

EQR (Equity Resident--$56.40; +0.45; optionable (EQR): REIT
http://biz.yahoo.com/p/e/eqr.html
STATUS: EQR found support at its 50 day MVA (54.93) after falling out of its handle (to a cup dating back to late December), and the last two sessions has rebounding admirably to close above its short-term MVA's (10 day at 56.10). Friday's move was on much lower volume (226,300; average 328,400), and Thursday's, although stronger, was still on volume that was below the average. We will see if it can hold the 10 day, and look for a stronger move over the handle high of 57.50 before taking positions.
BUY POINT: Breakout: 57.63, on volume of 492,000 or more. Stop: 53.60.
POSITION: Breakout: Stock and/or October $55 calls to buy (EQR JK).

CNA (Cna Financial--$39.62; +0.47; optionable (CNA): Insurance
http://biz.yahoo.com/p/c/cna.html
STATUS: Continuing in its lengthy consolidation, making a move off of its 50 day MVA (38.62) the last two sessions, but on low volume (down to 72,800 Friday; average 147,000). The consolidation is about six weeks old, and we got some sharp selling down to the 50 day Friday that could have been a shakeout. We will see if we can now get some more volume on a breakout move. Target: $44-46.
BUY POINT: Breakout: 40.37, on volume of 220,000 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:

SNRA (Serena Software--$25.94; -3.56; optionable):
http://biz.yahoo.com/p/s/srna.html
STATUS: Broke from a cup with handle in late June, but it fell hard from the breakout high of 37.25. After holding its 50 day MVA (26.92) for one bounce, the stock dropped back hard on Friday, taking out that support on huge volume (2.95 million; average 696,600). At its low it touched 24.46, and we will see if it comes all the way back to test the 50 day, but on a drop back below Friday's low on continued strong selling, a put play down to a target of 20, in the range of its early-May consolidation.
BUY POINT: A move down below 24.46 on continued strong volume, perhaps after an initial test of the 50 day.
POSITION: August $35 puts to buy (NHU TG).

CYMI (Cymer--$24.37; -2.34; optionable): Semiconductor equipment.
http://biz.yahoo.com/p/c/cymi.html
STATUS: Formed a cup with handle from February-May, but the handle just continued to get longer and drop further (handle high 33). The downtrend has been fighting the 10 day MVA (25.14), but Thursday the stock tried a move at its 200 day MVA (26.28) on weak volume and off of that move it dropped back heavily Friday (volume sharply higher at 482,000; average 399,300). There is some recent support in the 23-24 range, but we are looking for the drop to continue and are targeting the next level of support, at 20.
BUY POINT: A move below 24 on continued strong, above average volume.
POSITION: August $35 puts to buy (CQG TG).

AMAT (Applied Materials--$46.36; -0.07; optionable): Semiconductor equipment.
http://biz.yahoo.com/p/a/amat.html
STATUS: Has been steadily trending down from recent highs near 60. It made a rather severe drop back from its 50 day MVA (49.37) last week but found support at 42 for a bounce, but that move is stymied below its 10 day MVA (46.50). Friday saw AMAT form a tight 'star' doji under the 10 day, indicating that it could be ready to fall back down. We will look for stronger selling back toward a target of 40 (March lows, with April lows down at 38).
BUY POINT: A drop back below 45 on increased volume (down to 14 million Friday; average 19.4 million).
POSITION: August $55 puts to buy (ANQ TK).

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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