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us stock market, trade stock
Begin part 3 of 3
SUBSCRIBER QUESTIONS:
Q: I've always spoke very highly of your newsletter while gaining a tremendous amount of insight and knowledge over the years, most of which I can attribute to your newsletter. However, I am trying to understand how we could have been so far off the mark today. I was looking for a pull back to 1975 or at least 2000 on the Nasdaq and positioned myself for such a move when the market went completely toward the other extreme, breaking the 50 EMA, 10 EMA, 18 EMA and the 50 MA and again on low volume. I'm wondering, are we putting too much weight on price/volume action? I want to learn from this lesson because I missing out on good gains recently. I was perfectly positioned with several long positions and I closed them out fearing a significant pullback in the market with my long positions going down with it. . . . I'm sure that I'm missing something. Please enlighten me. Thank you!
A: Great question, one that can help us all put a perspective on the current action. No, nothing is wrong w/price/volume action. Market is going through a consolidation and it whipsaws back and forth: up Monday, down Tuesday on rising volume. The market cannot maintain gains on lower and lower volume, especially while selling rising volume: the bottom will fall out if it continues to do that because there are fewer and fewer buyers moving in on each move up. Once the big money is gone, those that bought last get hurt the most.
That does not mean we do not continue to take positions on good stocks that are showing good action. We have said all along that this is not a really nasty correction, just a decent consolidation. It will still probably go lower before it is through, but it will meander in doing so because there are no strong sellers either. The buyers and sellers push it back and forth as no one side has control. That is what a good consolidation does as it weeds out or converts the sellers to buyers. Many stocks that were up Monday were right back down Tuesday, but many small caps were just fine. That is why we keep looking for good stocks to enter. The good stocks have held up during the selling and are showing larger volume and good price/volume action. When the market gets weak, they hold up better because there is real money moving into them and they are not sold out rapidly in this consolidation: funds are accumulating them. The momentum stocks are running up and down on the hedge funds trading within the consolidation. As long as our stocks hold up well, we let the work for us, and that has been paying off. We never sell good positions that are acting very well just because the market is consolidating and other stocks are running up and down. The leaders tend to show solid action during the consolidation because they are setting up to lead. The others follow later. When we see good stocks showing good action, we stick with them and don't sell out in anticipation of a problem that they may weather just fine, particularly if the market overall is simply in a consolidation mode as it is now.
Similarly we do not abandon potential plays that have set up well and are showing good accumulation because the market is consolidating. Again, leaders will lead, and that means they typically set up first and make the first moves. They can breakout, move up, then consolidate some with the market as well. They hold support, and then on the next move they are up out in the lead once more. We definitely do not want to ignore these stocks as they set up for the next move; they could be the next leaders that set the pace for the rest of the market to rally higher.
What we have to do is keep an eye on the big picture. We have been talking about the overall consolidation proceeding quite well though we feel there is still quite a bit more work to do. The Monday low volume rally and Tuesday failed rally and higher volume selling are indications of this. Again, however, the action was not horrible as volume was still below average on the rollover. Small and mid-cap stocks continue to perform, and these were one of the important leadership legs in the 2003 rally. We don't want to ignore them as they set up and start moves. The price/volume action indicates that there is more work ahead, and there will be more lateral move and most likely more downside before this is all over. NASDAQ will come around and complete this consolidation, however, and it will be ready to lead again. Those smaller caps that we pick up could be very big winners when that happens. Why? Because they are showing the right price/volume action as they work through their bases that shows us money is moving in and also sets up a good foundation for a strong breakout and run. We will see the price/volume action turn more positive (up a bit on up sessions, lower on down sessions) as the overall market starts the latter part of its base. That will show us that the rest of the market is setting up for a breakout and a more sustained move higher. That will expose these daily to weekly gyrations in the consolidation for what they are: short term tug of war as the market shakes out the sellers. We will stay with good positions, cutting them if they start showing poor price/volume action or break support and cannot make a relatively quick recovery.
THE PLAYS
In each report we prepare full write-ups for those plays that look ready to move. Those that have made the move or are still setting up are discussed in the continuing play table. The purpose is to focus on those stocks that are set to move.
Good movers Tuesday: IGT; SPAB; TTP; VAPH; WRLS; ANSI
NEW PLAYS: This section includes plays from all sections other than pre-announcements. Those are contained in the pre-announcement section.
New Pre-Splits: These are momentum plays where we look to jump on when it makes the move, grab some gain, and when it starts to falter, take the money. We often use options in order to leverage the smaller price movements we look for on these plays.
Play Date: 03/02/2004
BWA (Borg Warner--$91.07; -1.47; optionable): Auto parts. Splits 2:1 on 5-18-04
http://biz.yahoo.com/p/b/bwa.html
STATUS: 50 day MVA test. Strong rally from March 2003 where the stock doubled. It has come back to test that strong move, settling down to the 50 day MVA (90.38) last week and then starting up off that level Monday. Volume was lower so it stalled at the 18 day MVA (92.30). Volume remained low as it gave back that move. Looking for it to move back over that 18 day MVA on above average volume and move in to catch the bounce. Using options on this one.
Volume: 176.5K Avg Volume: 225.227K
BUY POINT: $92.38 Volume=275K Target=$98.49 Stop=$90.95
POSITION: BWA GF - July $90c (58 delta)
http://www.investmenthouse.com/cs/bwa.html
New Post-Splits:
Play Date: 03/02/2004
JEF (Jeffries Group--$37.45; -0.04; optionable): Investment brokerage
http://biz.yahoo.com/p/j/jef.html
STATUS: Double bottom. JEF is working through a nice 6 week base that has formed roughly over the 18 day MVA (37.09). Solid 3 to 1 accumulation (3 up price weeks on rising volume to 1 down price week on rising volume) and money flow shooting higher ahead of the stock. Volume has started to swell the past week and it was up again Tuesday as JEF shot higher to 38.69 but could not hold the move. Looking for it to follow that money flow higher on continued solid trade.
Volume: 783K Avg Volume: 298.681K
BUY POINT: $38.38 Volume=600K Target=$44 Stop=$36.97
POSITION: JEF GH - July $40c (54 delta) &/or Stock
http://www.investmenthouse.com/cs/jef.html
Play Date: 03/02/2004
TTI (Tetra Technologies--$26.90; +1.40; no options): Oil and gas service company
http://biz.yahoo.com/p/t/tti.html
STATUS: Cup. Fairly volatile pattern, but has formed a definite cup the past 9 weeks, holding the 50 day MVA (25) on the lows as it formed the bottom of the pattern. Accumulation is strong at 3 to 0 as well. That combination shows very good support for the stock at the key 50 day MVA level. Volume has swelled the past four sessions, really jumping Tuesday as TTI surged off the 50 day. Looking for a continued strong volume move to get into positions.
Volume: 383.5K Avg Volume: 128.5K
BUY POINT: $27.22 Volume=193K Target=$31.55 Stop=$25.64
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/tti.html
Leader plays: May or may not turn into split candidates, but good patterns ready to move.
Play Date: 03/02/2004
ECOL (American Ecology--$8.03; -0.22; no options): Waste management
http://biz.yahoo.com/p/e/ecol.html
STATUS: Cup. ECOL is working through a 9 week base that follows an excellent move where the stock surged from 3 to 9 in 4 months. It needed a breather, and it is taking it. The action is solid, as it has pulled back to the 50 day MVA (6.89), using that as its support for the base. That shows us there is some solid support for the stock. Monday it shot higher on some huge trade, starting to form the right side of its base. Tuesday it held the gains, moving more or less laterally on lower volume. It may form a handle here, a short lateral and slightly lower move on light volume where the last sellers get frustrated that it stopped the move and sell out. Looks great with surging money flow, however, so we want to be ready to jump on if it continues the move on strong trade.
Volume: 135.281K Avg Volume: 71K
BUY POINT: $8.38 Volume=150K Target=$10.12 Stop=$7.79
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/ecol.html
Play Date: 03/02/2004
NUS (Nu Skin--$20.29; +0.71; no options): Cool liquid skin band aid
http://biz.yahoo.com/p/n/nus.html
STATUS: 50 day MVA test. NUS is working on its second flat base in the past 4 months, the last one blasting higher before forming the current base. It has held over the 50 day MVA (18.75) the past 7 weeks, showing positive 2 to 1 accumulation and surging money flow. Volume has jumped the past two sessions as NUS rallied off the 50 day. Looking to pick it up on a continued volume move from here.
Volume: 505.6K Avg Volume: 303.409K
BUY POINT: $20.42 Volume=455K Target=$24.48 Stop=$19.18
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/nus.html
Continuing Leader Plays:
Play Date: 03/01/2004
ALVR (Alvarion--$14.41; -0.29; optionable): Telecom equipment
http://biz.yahoo.com/p/a/alvr.html
STATUS: Ascending triangle. Still solid, tapping the 18 day MVA on the low (14) and rebounding to cut most of the losses even as the rest of the market sold. Good action in a selling market. ALVR is working in a short 6 week base showing solid 3 to 0 accumulation (3 up price weeks on rising volume versus 0 down price weeks on rising volume); that and the bounces off the 50 day MVA show there is very solid money backing this stock. As noted before, breakouts from these patterns can provide explosive breakouts.
Volume: 977.145K Avg Volume: 774.863K
BUY POINT: $15.06 Volume=1.2M Target=$18.12 Stop=$14.01
POSITION: QBY FC - June $15c (52 delta) &/or Stock
http://www.investmenthouse.com/cs/alvr.html
Play Date: 02/14/2004
PRFT (Perficient--$4.21; +0.11; no options): Business software
http://biz.yahoo.com/p/p/prft.html
STATUS: Cup w/handle. Strong Friday surge but waffling some this week as volume falls below average on a modest pullback. It is holding the 18 day MVA (3.89) on the lows as volume dries up on the test. Solid accumulation and surging money flow. After this pullback we are looking for a break higher on stronger, above average volume.
Volume: 150.558K Avg Volume: 162.136K
BUY POINT: $4.38 Volume=229K Target=$5.48 Stop=$4.07
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/prft.html
Play Date: 03/01/2004
TTP (Titan Pharmaceuticals--$4.33; +0.13; no options): Biotechnology
http://biz.yahoo.com/p/t/ttp.html
STATUS: Test 50 day MVA. Another good volume session, but TTP backed off its high (4.45) and we held off on taking positions. Still a very solid pattern as TTP broke out of an 11 week base in mid-January and ran to 4.50 on this high. Solid accumulation in the prior base at 7 to 1. It might pull laterally for a few sessions given the action, forming a handle to the nice little pattern. If it continues to rally, however, we will start a position.
Volume: 445.9K Avg Volume: 233.272K
BUY POINT: New: $4.38 (orig. $4.32) Volume=342K Target=$5.25 Stop=$4.02
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/ttp.html
PRE-ANNOUNCEMENT PLAYS
Current Pre-Announcement Plays: In each report we look at the candidates that are in the best patterns ahead of their potential announcements. This focus on leaders in good patterns allows us to make good money even if companies do not announce the split, something that they are still gun-shy of as the market and economy recovers.
AGN: Forecast 4-26-04.
APOL: Forecast 3-24-04 or with the 2-27-04 board meeting.
BCR: Researching next date.
BMET: 3-17-04
CAKE: 4-19-04
CHS: Forecast 3-3-04 after the close.
DNA: Forecast in 4-16-04 with shareholder meeting.
ELAB: Researching next date.
IDXX: Forecast 4-19-04.
IRM: Forecast 2-26-04. No split but great earnings and still moving higher.
LM: Researching next possible date.
LOW: Forecast in the May shareholder meeting.
LXK: Researching next date.
MBG: Forecast 3-4-04 before the open.
MBT: Researching date.
MIK: Forecast 3-3-04.
NMGA: Forecast 3-3-04 after the close.
OSI: Forecast 4-15-04.
SHFL: Forecast 2-26-04 with earnings. No split but still surging.
SONC: Forecast 3-15-04.
STJ: Forecast 4-12-04 in conjunction with earnings.
TOL: No split with earnings so looking to 3-2-04 with a board meeting. Still surging on the earnings.
UOPX: Forecast 3-24-03 with earnings.
VAR: Two Fridays back it was announced VAR is calling a special shareholder meeting to increase authorized shares. Date has not been released yet and VAR will file a proxy statement to that effect. We expect that will be for the split and will be ready to move in on any chance the stock gives us.
VIP: Forecast 3-26-04.
WFMI: No announcement 2-11-04. Nice 18 day MVA and bounce on volume.
Full Write-ups: We do not cover all candidates in full in each report, but focus on those ready to make a move or are right at their forecast announcement date. This way we are focused on those stocks ready to make moves.
New Pre-Announcement Plays:
Play Date: 03/02/2004
HUG (Hughes Supply--$49.42; +0.42; optionable): Plumbing Supply. Forecast to announce a split 3-9-04 after the close in conjunction with earnings.
BACKGROUND: Last split 3:2 on 7-17-97 at a price of $39.50
http://biz.yahoo.com/p/h/hug.html
STATUS: Flat base. HUG is working laterally along the 50 day MVA (48.13) in a 9 week base sporting solid 3 to 1 accumulation. The accumulation along with the base at the 50 day MVA shows there is solid support for this stock at that key level. Volume has been below average for the past month as it worked laterally, just what you want to see. Tuesday volume jumped up to near average as HUG moved through the simple 50 day MVA (49.17); that is an indication a move is starting. In addition, money flow has been surging up ahead of price. Looking for the price to follow the money flow.
Volume: 219.5K Avg Volume: 209.227K
BUY POINT: $50.62 Volume=314K Target=$58.25 Stop=$48.42
POSITION: HUG GJ - July $50c (51 delta) &/or Stock
http://www.investmenthouse.com/cs/hug.html
Continuing Pre-Announcement Plays:
Play Date: 02/24/2004
CHS (Chicos Fas--$43.98; +0.18; optionable): Apparel stores. Forecast to announce a split on 3-3-04 after the market closes in conjunction with earnings.
BACKGROUND: Last announced a 2 for 1 split on 6-27-02 in conjunction with a board meeting. The stock price was $36.60. It also announced a 3 for 2 split on 12-19-01 in conjunction with a board meeting. The stock price was $38. Several prior splits before these.
http://biz.yahoo.com/p/c/chs.html
STATUS: Volume has been up and down as the past week as CHS has made a somewhat halting move up the 10 day MVA (42.58). Tuesday it continued the Monday low volume move, but volume was back above average as it gapped higher but could do no more. Expecting an announcement after the close Wednesday. We are going to look for a pullback at some point tomorrow to get us into a position ahead of the news.
Volume: 1.068M Avg Volume: 1.103M
BUY POINT: New: Pullback toward 43ish (orig. $42.68) Volume=1.1M Target=$49 Stop=$40.29
POSITION: CHS EH - May $40c (64 delta) &/or Stock
http://www.investmenthouse.com/cs/chs.html
Play Date: 02/21/2004
MIK (Michaels--$48.70; -0.17; optionable): Crafts, hobby stores. Forecast to announce a split on 3-3-04 during the market in conjunction with earnings.
BACKGROUND: Last announced a 2 for 1 split on 10-31-01 in conjunction with a board meeting. The stock price was $52. The annual shareholder meeting was in June 03. The company has sufficient shares for q 2 for 1 split.
http://biz.yahoo.com/p/m/mik.html
STATUS: Cup w/handle. Not attracting any volume on the move higher off the 18 day MVA (47.17) the past week with trade coming in well below average. Looking for the stock to come back early and test 48 intraday Wednesday and give us an entry point for some positions but we are not going to load the boat on this one given the tepid volume on the move higher. Still a very solid 15 week base with solid 4 to 2 accumulation.
Volume: 248.9K Avg Volume: 507.318K
BUY POINT: Test toward 48 early. (orig. $48.44). Volume=815K Target=$55.72 Stop=$46.22
POSITION: MIK FT - June $47.50c (49 delt) &/or Stock
http://www.investmenthouse.com/cs/mik.html
Play Date: 01/24/2004
NMGA (Neiman Marcus Group--$57.11; +0.11; optionable): High end department stores. Forecast to announce a split 3-3-04 after the close in conjunction with earnings.
BACKGROUND: Based on our research NMGA has never announced a split. It is trading at an all-time high, however, and in a range where retailers frequently announce splits.
http://biz.yahoo.com/p/n/nmga.html
STATUS: Testing the breakout. Holding the 18 day MVA (56.86) on a nice pullback testing a solid rally to near 60. Volume has jumped the past three sessions. It moved over the 10 day MVA (57.01) Tuesday on very good volume. Looking for it to move up from here to take some positions ahead of the close and the forecast announcement.
Volume: 227.2K Avg Volume: 160.5K
BUY POINT: New: $57.45 (orig. $55.39) Volume=254K Target=$63.75 Stop=$56.88
POSITION: NMG GK - July $55c (56 delta) &/or Stock
http://www.investmenthouse.com/cs/nmga.html
PRE-SPLITS
Play Date: 02/24/2004
ATVI (Activision--$21.07; -0.11; optionable): Multimedia Graphics software. Splits 3:2 on 3-26-04
http://biz.yahoo.com/p/a/atvi.html
STATUS: Testing the breakout. Has crept up the 10 day MVA (20.79) the past week on low, below average volume. Tuesday it showed a tight doji on the candlestick chart. This is a critical point as it is at the February high. Looking for a strong volume break higher to move in. ATVI broke from a 7 week flat base 3 weeks back on a nice volume surge. Relative strength broke out on the move, a sign of the stock is out performing the rest of the market. Money flow remains strong.
Volume: 975.36K Avg Volume: 1.975M
BUY POINT: New: $21.28 (orig. $20.65) Volume=2.3M Target=$23.75 Stop=$19.88
POSITION: AQV ED - May $20c (60 delta) &/or Stock
http://www.investmenthouse.com/cs/atvi.html
Play Date: 02/28/2004
EXC (Exelon--$67.11; -0.07; optionable): Utility holding company. Splits 2:1 on 3-11-04.
http://biz.yahoo.com/p/e/exc.html
STATUS: Flat base. Volume remained strong as EXC tried to rally Tuesday. It moved to 67.93 but could not hold the move. Very solid pattern, an 8 week lateral move over the 50 day MVA (65.67). Accumulation is excellent at 3 to 0 (3 up price weeks on rising volume to 1 down price week on rising volume). That accumulation with the base holding over the 50 day shows there is some big money support. Money flow is strong as well. Looking for another volume move that holds up well after the initial surge.
Volume: 1.327M Avg Volume: 1.058M
BUY POINT: $67.38 Volume=1.2M Target=$71.38 Stop=$65.88
POSITION: EXC GM - July $65c (77 delta)
http://www.investmenthouse.com/cs/exc.html
POST-SPLIT
Play Date: 02/10/2004
TASR (Taser--$52.35; -1.73; no options): Stun guns
http://biz.yahoo.com/p/t/tasr.html
STATUS: Test 18 day MVA. Holding the 18 day MVA (51.68) on continued below average volume. It has moved laterally on that low volume the past four sessions, an indication that selling has backed off. Being patient and waiting for a strong, above average volume move to take new positions.
Volume: 2.849M Avg Volume: 3.686M
BUY POINT: New: $54.88 (orig. $45.88) Volume=1M Target=New: $68 (orig. $54.55) Stop=$56.75
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/tasr.html
Play Date: 01/24/2004
TSCO (Tractor Supply--$43.35; +0.07; optionable): Farm and ranch depot.
http://biz.yahoo.com/p/t/tsco.html
STATUS: Reverse head and shoulders. Still working through the 4 month pattern, the same type of pattern that launched TSCO higher out of the 2003 consolidation that we saw and were able to jump on and ride for another good gain and another split. Very low volume move laterally, shaking out the last sellers. Accumulation is decent at 3 to 1, and its formation over the 50 day MVA (41.63) is another good sign of institutional support.
Volume: 170.852K Avg Volume: 428.909K
BUY POINT: $44.55 Volume=719K Target=$55 Stop=$42.05
POSITION: QTF GI - July $45c (59 delta) &/or Stock
http://www.investmenthouse.com/cs/tsco.html
Good Investing!
Jon L. Johnson and the Stock Split Report 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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