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Begin part 2 of 3
THIS WEEK
The market has its work cut out for it again given the inability to hold the gains late Friday. It is still predominantly in a downtrend in the correction though NASDAQ and DJ30 have tapped at support intraday last week, held, bounced, and then paused on lighter trade. With the sentiment indicators we saw ahead of the move (put/call ratio, TRIN, rising volatility, increased talk of the bear continuing) as well as some slight improvement in NASDAQ price/volume action, we anticipate the bounce will continue even if it takes a slight pause and pullback early in the week.
Then there may be some hesitation ahead of the Friday jobs report. Moreover, the quarter ends on Wednesday, and that will add to some volatility to the market as positions are shuffled to take some gains or put some prettier faces in the portfolio for those quarterly reports. There is no lack of events for the market to deal with this week, but just as it used any news as a reason to sell the prior thus far this month, it will use some decent news to continue the rebound.
We are going to keep an eye out primarily for three play types this week. The first as always deals with stocks in good patterns and set up to make the move higher. In addition, after the Friday action there may be some strong stocks that started a rebound, pulled back some, and are still in position to take advantage of a continued move higher. Third, as stocks continue to rebound we will watch for those moving on lower and lower trade that reach resistance and stall. Those will provide opportunity as the market bounce stalls and the second test begins.
Again, if the bounce can continue into Thursday we will probably some hedging ahead of the jobs report. Stocks have moved higher ahead of previous reports in hope of better news only to get burned. Expectations are set lower this time and we feel that is good because we don't believe this will be the breakout month. Grand if it is, but we are not hopeful. It depends upon where the market is at that time, but if it has managed to continue its bounce it will most likely give some of the move up ahead of the report. If the jobs report fails to show a breakout and just meets expectations or, for shame, fails to meet the 100K expected, that will be a downer that most like starts another test. We would prefer the move to last longer as that makes for a better test.
We cannot forget earnings either. YHOO kicks them off in two weeks. First Call is indicating that the warnings are at quite a low pace even with required disclosure; if there is anything bad to say companies will air it and usually as early as possible to provide a window of forgetfulness before the actual results are released. A rally into the jobs report followed by some selling after the results sets up the market for a bounce as earnings start. If this is all wet and the jobs report is very strong stocks then rally further, set up a better test, and then come back a bit further down the road to make the bottom. Either way we look for it to continue the move higher then run out of steam for the next test that will set the bottom.
Support and Resistance
NASDAQ: Closed at 1960.02
Resistance: 1966 (18 day MVA) stalled it Friday. 1990 to 2000, the top of the late 2003 base. The exponential 50 day MVA (1999). The simple 50 day MVA (2035).
Support: Looking to see if the 10 day MVA (1948) and some prices from the recent March consolidation attempt (1943). Mixed tops and bottoms at 1900. The 200 day MVA (1890).
S&P 500: Closed at 1108.06
Resistance: The 10 day MVA (1109). The 18 day MVA (1116). The exponential 50 day MVA (1122) and price resistance at 1125. The simple 50 day MVA (1135). The January high (1155). Next is 1159 (February highs) and 1160 to 1175 the highs in that double top that spanned late 2001, early 2002.
Support: 1106 is a May 2002 top and represents some early 2001 lows. 1096 to 1100 may also try to hold. 1075 to 1070 from the December consolidation.
Dow: Closed at 10,212.97
Resistance: The 18 day MVA (10,267). The exponential 50 day MVA (10,359). The simple 50 day MVA (10,482). September/November up trendline (10,515).
Support: 10,000 to 9900-9850. 9859-9855 is the next real support
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
3-30-04
Consumer Confidence, March (10:00): 86.0 expected, 87.3 February.
3-31-04
Factory Orders, February (10:00): 1.4% expected, -0.5% January.
Chicago PMI, March (10:00): 61.0 expected, 63.6 February.
4-01-04
Initial jobless claims (8:30): 340K expected, 339K prior.
Construction spending, February (10:00): -0.1% expected, -0.3% January.
ISM (manufacturing sentiment), March (10:00): 59.8 expected, 61.4 February.
4-02-04
Non-farm payrolls, March (8:30): 100K expected, 21K February.
Unemployment rate, March (8:30): 5.6% expected, 5.6% February.
Average hourly earnings, March (8:30): 0.2% expected, 0.2% February.
Average workweek, March (8:30): 33.8 expected, 33.8 February.
THE PLAYS
Good movers Friday:
Best Plays:
1) ODP: Super base and making the breakout move.
2) PCR: Excellent test.
3) NVTL: Volume is surging as the stock does the same.
4) ROV: Great sales, earnings, accumulation, and volume on a breakout move.
5) CYTC: Nice test and looks ready to follow the money flow.
6) MXT: Making the move.
7) SLTC: Starting higher as volume starts to climb.
8) WAT: Tight range the past two sessions may mean it is ready.
NEW PLAYS:
Upside:
Play Date: 03/27/2004
NVTL (Novatel Wireless--$20.55; +1.90; no options): Wireless telecom
http://biz.yahoo.com/p/n/nvtl.html
STATUS: Flat base. NVTL blasted out of a 4 month flat base to start the year and then powered up to 21. by mid-February. It has since slipped into a 6 week flat base over the 18 day MVA (18.30). It has shown several volume spikes the past month, mostly on upside sessions. That is a very positive sign; we call them 'get ready' spikes. Excellent money flow surging ahead of price and relative strength breaking out as NVTL jumped higher Friday on a very strong volume session. Looks ready to make the breakout and we are ready to get in.
Volume: 1.57M Avg Volume: 761.045K
BUY POINT: $20.88 Volume=1.1M Target=$24.92 Stop=$19.42
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/nvtl.html
Play Date: 03/27/2004
ODP (Office Depot--$18.15; +0.60; optionable): Office supplies
http://biz.yahoo.com/p/o/odp.html
STATUS: Cup w/handle. ODP is starting the breakout Friday, surging on the strongest volume in over a month. Excellent accumulation at 10 to 4 (10 up price weeks on rising volume to 4 down price weeks on rising volume), a very good signal as it shows money was moving into the stock during its 7 month base. Looks excellent here.
Volume: 2.845M Avg Volume: 1.571M
BUY POINT: $18.32 Volume=2.4M Target=$22 Stop=$17.42
POSITION: ODP GW - July $17.50c (65 delta) &/or Stock
http://www.investmenthouse.com/ct/odp.html
Play Date: 03/27/2004
PCR (Perini--$17.10; +0.41; no options): Construction design services
http://biz.yahoo.com/p/p/pcr.html
STATUS: Breakout test. PCR is coming back for a nice low test of the 18 day MVA (16.31) after a pair of massive breakouts from flat bases (27 weeks on the first, 8 weeks on the second). After a mostly lower volume pullback volume started to jump Friday as PCR bounced up off of the 18 day. Money flow is strong, moving up well ahead of the price. Looking for PCR to bounce and follow the money. Looks good, and we have had success with this type of pattern of late.
Volume: 151.2K Avg Volume: 75.545K
BUY POINT: $17.48 Volume=150K Target=$20.55 Stop=$16.26
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/pcr.html
Play Date: 03/27/2004
ROV (Rayovac--$26.95; +1.35; optionable): Batteries and such
http://biz.yahoo.com/p/r/rov.html
STATUS: Ascending triangle. ROV is making the breakout from its 9 week base that used the 50 day MVA (24.53) as support to launch the Friday move where it surged on tremendous trade. Accumulation in the base is tremendous at 5 to 0 and money flow is surging ahead of price. Relative strength is making the breakout as well. Solid, solid pattern. Looking for it to continue the breakout to step in.
Volume: 822.6K Avg Volume: 470.227K
BUY POINT: $27.25 Volume=705K Target=$32.75 Stop=$25.34
POSITION: ROV FE - June $25c (75 delta) &/or Stock
http://www.investmenthouse.com/ct/rov.html
CONTINUING PLAYS:
Play Date: 03/25/2004
CERN (Cerner--$45.23; +1.05; optionable): Healthcare software
http://biz.yahoo.com/p/c/cern.html
STATUS: Breakout test. CERN broke out from a 16 reverse head and shoulders pattern in early March. It immediately tested back to the 50 day MVA (43.32) in the market selling. Good to see it selling on low volume as that indicates very few sellers as it moves back. Excellent money flow and relative strength ready for the breakout. Friday was a good price start but volume was lagging. Need to see volume surge with the continued move.
Volume: 327.001K Avg Volume: 605.363K
BUY POINT: New: $45.45 (orig. $45.12) Volume=986K Target=$51.88 Stop=$43.12
POSITION: CQN FI - June $45c (55 delta) &/or Stock
http://www.investmenthouse.com/ct/cern.html
Play Date: 03/24/2004
CRXL (Crucell--$8.10; -0.20; no options): Biotechnology
http://biz.yahoo.com/p/c/crxl.html
STATUS: Cup w/handle. Working on a nice handle to its 11 week base , moving laterally and slightly lower toward the 10 day MVA (7.93) on very low, below average volume. Very nice pattern setting up as CRXL shows a good pattern coupled with solid accumulation (3 to 0) and screaming money flow. Relative strength is ready to continue the breakout as well.
Volume: 105.806K Avg Volume: 247.818K
BUY POINT: $8.35 Volume=350K Target=$10.06 Stop=$7.77
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/crxl.html
Play Date: 03/17/2004
CYTC (Cytyc--$20.09; -0.16; optionable): Medical instruments
http://biz.yahoo.com/p/c/cytc.html
STATUS: Breakout test. CYTC exploded higher to start the month, breaking out of a nice cup with handle base. It rallied to over 22 and has now come back to test the 18 day MVA (19.59) in an orderly, lower volume pullback. Thursday it bounced off that level on rising though still below average volume. Surging money flow and relative strength ready to breakout again. Just being patient and waiting for the volume surge.
Volume: 886.542K Avg Volume: 1.628M
BUY POINT: $20.48 Volume=2.2M Target=$24.65 Stop=$19.34
POSITION: YQK HD - Aug. $20c (56 delta) &/or Stock
http://www.investmenthouse.com/ct/cytc.html
Play Date: 03/22/2004
LTD (The Limited--$19.6; +0.02; optionable): Apparel stores (The Limited, Victoria's Secret)
http://biz.yahoo.com/p/l/ltd.html
STATUS: 50 day MVA test. Still working laterally over the 18 day MVA (19.40) after a nice move off the 50 day MVA (19.05) and then gap higher on a strong increase in earnings guidance. Volume has jumped the past week as LTD continues to hold a very tight range. That quiet price action while volume starts to swell often indicates a stock is ready to make its move. Looks ready to make the break higher as volume was again stronger and above average.
Volume: 4.976M Avg Volume: 2.744M
BUY POINT: $19.68 Volume=3.9M Target=$23.62 Stop=$18.88
POSITION: LTD HD - Aug. $20c (43 delta) &/or Stock
http://www.investmenthouse.com/ct/ltd.html
Play Date: 03/22/2004
MXT (Metris--$7.17; +0.17; optionable): Credit services
http://biz.yahoo.com/p/m/mxt.html
STATUS: Cup w/handle. Friday volume was back above average as MXT started the breakout move. It was a marginal move higher and was coming back late in the session. Without the breakaway move and the fall into the close were where hesitant to move in. If it can continue the break higher this week we are ready to take positions. A solid 10 month base showing strong 11 to 5 accumulation. Money flow is excellent.
Volume: 1.733M Avg Volume: 1.149M
BUY POINT: New: 7.32 (orig. $7.02) Volume=1.7M Target=$8.68 Stop=$6.48
POSITION: MXT GU - July $7.50c (49 delta) &/or Stock
http://www.investmenthouse.com/ct/mxt.html
Play Date: 03/09/2004
SLTC (Selectica--$5.28; +0.20; no options): Internet software
http://biz.yahoo.com/p/s/sltc.html
STATUS: Cup w/handle. Volume was up to average Friday as SLTC started a solid move toward the breakout. Money flow is excellent, rallying well ahead of price. Excellent 6 to 0 accumulation in the 22 week pattern. Looks solid and we are ready to move in on the breakout.
Volume: 190.613K Avg Volume: 162.272K
BUY POINT: $5.37 Volume=242K Target=$6.48 Stop=$4.96
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/sltc.html
Play Date: 03/13/2004
STG (Stonepath Group--$3.70; 0.00; no options): Management services
http://biz.yahoo.com/p/s/stg.html
STATUS: Breakout test. STG exploded out of a very nice 30 week double bottom with handle base. It surged to 4.25 and has spent this week pulling back on lower volume in the market selling to test the breakout and holdover the 50 day MVA (3.45). The low volume is key because it shows few sellers as the stock comes back to test the move, just a shakeout of the quick profit takers. Money flow remains excellent, and we are looking for STG to hold this level and start back up on a volume surge. That is when we move in.
Volume: 182K Avg Volume: 397.318K
BUY POINT: $4.04 Volume=563K Target=$5 Stop=$3.76
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/stg.html
Play Date: 03/11/2004
TLCV (TLC Vision--$11.39; -0.15; optionable): Medical appliances
http://biz.yahoo.com/p/t/tlcv.html
STATUS: Breakout test. Tried to rally Friday on some stronger, above average volume, but gave the move back and closed slightly lower. Still solid in its 4 week lateral move over the 18 day MVA (10.73). Just looking for it to continue the move higher on continued strong volume.
Volume: 971.093K Avg Volume: 842.909K
BUY POINT: New: $11.75 (orig. $11.08) Volume=1.2M Target=$13.12 Stop=$10.32
POSITION: TKU GB - July $10c (66 delta) &/or Stock
http://www.investmenthouse.com/ct/tlcv.html
Play Date: 03/20/2004
WAT (Waters Corp.--$39.15; -0.06; optionable): Scientific & technical instruments
http://biz.yahoo.com/p/w/wat.html
STATUS: Cup w/handle. A very tight range the past two sessions as WAT moves to complete the 9 week base over the 50 day MVA (37.26). Volume remains below average as it does, just what we want to see. Money flow continues to run higher ahead of the price and relative strength is very solid, looking for the next breakout. This pattern is actually part of a larger 27 month base. Looks ready to make the move.
Volume: 561.7K Avg Volume: 684.454K
BUY POINT: $39.45 Volume=850K Target=$45.58 Stop=$37.75
POSITION: WAT HH - Aug. $40c (44 delta) &/or Stock
http://www.investmenthouse.com/ct/wat.html
Play Date: 03/08/2004
WSTM (Workstream--$2.63; +0.07; no options): Staffing & outsourcing
http://biz.yahoo.com/p/w/wstm.html
STATUS: Cup with handle. Gapped sharply lower Friday, but held the 50 day MVA (2.38) but then rallied sharply to post a modest gain. Continues the lateral move in what is turning into an elongated handle. Money flow is rallying ahead of price and relative strength is ready to make a new breakout. Looks super.
Volume: 156.816K Avg Volume: 203.986K
BUY POINT: $2.72 Volume=234K Target=$3.55 Stop=$2.53
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/wstm.html
End part 2 of 3
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