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us stock market, trade stock
Begin part 2 of 3
Big economic data week concludes with the granddaddy of them all, the April jobs report.
My how a lagging indicator has become so important. The first Friday of each month is anticipated two weeks ahead of time. Ahead of the jobs report is the ISM on Monday, and it could have a stronger employment component as well as seen Friday in the Chicago PMI. Then factory orders, ISM services, productivity, March wholesale inventories (watch this for implications as to increasing final Q1 GDP), and of course, jobs.
That will most likely keep the market grumbling until Friday. As we noted two weeks back, the market is setting up for the jobs report. After some rejoicing over the March job creation, it has feared the report because March was verification of all of the other data that show, truly, this is a recovery. It fears this report because of the implications a strong report has vis- -vis Fed action. High praise indeed for the Fed's abilities.
There are a few options for the market. It is getting ready for an oversold bounce. It can reverse and rebound ahead of the report. As noted, we need to see if it bounces on volume or just pops to the surface on low trade for a gasp of air. High upside volume is anticipating good news and suggests the market is dealing once more with what higher interest rates really mean for an economy that was teetering on the brink of deflation similar to Japan and its 12 years of hibernation. Low rebound volume gives us time to tighten our chinstraps for the move back down. We use that to unload positions and let downside plays set up for the next fall.
The market can also continue to grumble around these levels ahead of the report; that sets it up well for a rally on good news (the best would be solid jobs growth but not blowout again) or readies it for a further drop. That scenario does not tell is a lot about the market psyche, and does not give us much to operate with in managing our positions.
It can also simply continue to fall, but that also leads to the relief bounce. If NASDAQ hits near the March lows and SP500 does the same, that will most likely provide a near term upside catalyst. Whether that develops further depends, again, on the upside buying strength.
In short, the market is at another important juncture with the current momentum being down. That is, however, typically the way it is when bottom is hit. The scenario we anticipate as most likely is the relief bounce. Whether that occurs on volume or not depends on the market expectations, and the market has not tipped its hand at this juncture. If it is a low volume bounce we will use that as an opportunity to move out of some upside positions that need help, and let downside positions develop as they test their recent breakdowns by moving up to tap former support and then rolling back over. If there is volume, we see many strong stocks that have weathered the selling very well, making low volume tests of the move higher. They are beautifully set up to continue the move if the market can provide some upside volume on a change of attitude about what the future holds given strong economic data that continues to improve despite predictions that it won't.
Support and Resistance
NASDAQ: Closed at 1920.15
Resistance: The 200 day MA (1934). Some prices from the March consolidation attempt (1943) tried to act as some support on the way down, & thus may act as some resistance. 1978, the April closing low. 1990 to 2000, the top of the late 2003 base. The simple 50 day MA (2002) and 50 day EMA (2008). 2050 represents some prior price points and has stopped NASDAQ the last time it tried that level. Breakout from the pattern is 2080. 2089 is the February closing high. 2112 is the early January high. 2154 is the January high.
Support: Mixed tops and bottoms at 1900. The March low (1896). 1850 below that.
S&P 500: Closed at 1107.30
Resistance: 1118 is the April closing low. 1125 represents some price points. The exponential 50 day MA (1128) and the simple 50 day MA (1130). The April and January highs (1150 to 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. 1103, the weekly up trendline from the early 2003 lows. 1096 to 1100, then the March low (1087). 1075 to 1070 from the December consolidation. The 200 day SMA (1073).
Dow: Closed at 10,225.57
Resistance: The exponential 50 day MA (10,385) and simple 50 day MA (10,395). 10,570 is the April high. Price consolidation at 10,600 level. September/November up trendline (10,750). 10,747 is the February high.
Support: 10,250 is trying to hold. 10,000 to 9900-9850. The 200 day SMA (9973). 9859-9855.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
5-03-04
Construction spending, March (10:00): 0.5% expected, -0.1% February.
ISM, April (10:00): 62.7 expected, 62.5 March.
5-04-04
Factory orders, March (10:00): 2.4% expected, 0.3% February.
FOMC meeting results (2:15)
5-05-04
ISM services, April (10:00): 65.0 expected, 65.8 March.
5-06-04
Productivity, preliminary Q1 (8:30): 3.5% expected, 2.6% Q4
Initial jobless claims (8:30): 335K expected, 338K prior.
5-07-04
Non-farm payrolls, April (8:30): 168K expected, 308K March.
Unemployment rate, April (8:30): 5.7% expected, 5.7% March.
Hourly earnings, April (8:30): 0.2% expected, 0.1% March.
Average workweek: 33.8 expected, 33.7 March.
Wholesale inventories, March (10:00): 0.5% expected, 1.2% February.
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.
NEW PLAYS: This section includes plays from all sections other than pre-announcements. Those are contained in the pre-announcement section.
New Pre-Split Plays: We look to jump in on these when they start to move, take what it will give, and then bank it and look for the next opportunity.
Play Date: 05/01/2004
IEX (Idex--$47.25; +0.19; optionable): Machinery. Splits 3:2 on 6-1-04
http://biz.yahoo.com/p/i/iex.html
STATUS: Breakout test. IEX shot higher two weeks back on solid trade, running to 48.60 on the high. As the market sold off IEX made a very calm, orderly breakout test, holding most of its gain as it moves laterally over the 10 day EMA (46.52). Excellent money flow and relative strength that is breaking out again even as the stock tests, a very bullish sign. Volume bumped back up Friday as it posted a modest gain, but it is telling us to be ready for the breakout run to resume.
Volume: 255.4K Avg Volume: 145.141K
BUY POINT: $47.78 Volume=218K Target=$53 Stop=$46.32
POSITION: IEX GI - July $45c (82 delta)
http://www.investmenthouse.com/cs/iex.html
New Post-Split buy points:
Play Date: 05/01/2004
AAP (Advance Auto Parts--$43.15; +0.12; optionable): Auto parts stores
http://biz.yahoo.com/p/a/aap.html
STATUS: Breakout test. Excellent breakout 2 weeks back from a 3.5 month base. It has moved laterally over the 10 day EMA (42.98) on lower and lower below average volume, holding onto most of its gain as the market sold off on high volume. Relative strength has continued to rise even as the stock tested the 10 day EMA. Again, this is a sign of strength. Looking for the stock to continue the breakout move with a short shot of volume.
Volume: 336.8K Avg Volume: 613.135K
BUY POINT: $43.68 Volume=625K Target=$50 Stop=$42.82
POSITION: AAP IH - Sept. $40c (72 delta) &/or Stock
http://www.investmenthouse.com/cs/aap.html
New Leader Plays: May not turn into a split play but a solid stock.
Play Date: 05/01/2004
ARIA (Ariad Pharma--$11.36; -0.48; optionable): Cancer drugs
http://biz.yahoo.com/p/a/aria.html
STATUS: Breakout test. ARIA is one of the cancer drug biotechs that exploded higher in the biotech hoopla last week. As the market sold ARIS did as well, fully filling the gap as it tapped at the 18 day EMA (11.16) Friday and managed to rebound. It still posted a loss on the session but volume has faded each session as it pulled back. We are looking for it to resume the breakout this wee, rallying back over 12 on stronger volume.
Volume: 967.111K Avg Volume: 948.969K
BUY POINT: $12.12 Volume=1.4M Target=$14.55 Stop=$11.27
POSITION: UAQ HV - Aug. $12.50c (49 delta) &/or Stock
http://www.investmenthouse.com/cs/aria.html
Continuing Leader Plays: New buy point.
Play Date: 05/01/2004
EVCI (EVCI Career Colleges--$12.22; +0.52; no options): Education and training
http://biz.yahoo.com/p/e/evci.html
STATUS: 50 day EMA test. After a nice breakout and run up to 14.77, EVCI needed a rest, and it is taking it with this orderly, low volume pullback to the 50 day EMA (11.35). last week it tapped right over the 50 day and then moved laterally the entire week as volume started edging higher. Friday volume jumped back above average as the stock tapped the 50 day on the low and bounced for a gain. You want to see volume jump as a stock tests the 50 day and start the rebound. Looking for more volume as it continues the move off the 50 day.
Volume: 376.863K Avg Volume: 280.973K
BUY POINT: $12.52 Volume=400K Target=$15 Stop=$11.64
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/evci.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 even after the market has made a good recovery as well as the economy. The key with splits now is in the pattern; yes there is a positive move on the announcement, but stocks in this market need to have a good pattern of accumulation to really benefit from a split announcement.
AGN: Researching the next date.
APOL: Forecast 6-12-04 before the open.
BMET: Researching next date. Holding well at the 50 day.
CHS: Forecast 5-27-04 after the close. Not looking that hot right now, but there is time to let it set up before the split date.
CRL: No announcement 4-28-04, but holding up well for the next move.
CWTR: Forecast 5-26-04.
DGX: No announcement 4-22-04 but continues to hold up well, setting up for the breakout.
ESRX: Forecast 5-26-04 with its shareholder meeting.
FWRD: No announcement 4-27-04. Still holding up with a test of the 18 day EMA.
GTK: Forecast 6-18-04.
HUG: Forecast 5-25-04 after the close.
IDXX: Researching next date. Very nice lateral move testing the breakout over the 18 day EMA.
LM: Forecast 5-4-04. Testing the 50 day EMA.
LXK: Researching the next split date as it tests the 50 day EMA.
MBG: Researching the next date. Nice 50 day EMA test.
PDCO: Mid-May, 2004.
QCOM: Forecast 5-3-04 with a board meeting. Tough day Friday but will see if gets good news on Monday.
RS: Forecast 5-19-04.
SONC: Forecast 6-21-04. Announced its split Friday but is struggling below the 50 day EMA.
STJ: Researching the next date, but looks excellent with its 7 week cup with handle base.
STN: Looking for next date. Broke the 18 day but is rebounding at support.
UOPX: Forecast 6-24-04 before the open.
VAR: Did not announce with earnings, and it is struggling to hold the 50 day as volume has really turned choppy. Needs to settle down and then start the move again.
WFMI: Forecast 5-5-04 after the close.
ZBRA: Has turned very volatile after announcing earnings but no split on 4-28.
ZMH: No split announced 4-26-04. Holding the 18 day EMA still but it has lost its momentum for now.
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: 05/01/2004
BIO (Bio-rad Labs--$58.60; -0.20; optionable): Scientific & technical. Forecast to announce a split on 5-6-04 after the market closes in conjunction with earnings.
BACKGROUND: Last announce a 2 for 1 split on 2-7-02 in conjunction with earnings at a stock price of $57. Authorized share were increase two days prior to the announcement. The annual shareholder meeting was on 4-27-04 at which time additional shares were authorized.
http://biz.yahoo.com/p/b/bio.html
STATUS: Cup w/handle. BIO fell back to the 18 day EMA (58.94) the past week in the market selling, but volume was extremely low on the selling. It was not distributing like the market, but was instead forming the handle to its 17 week base. Excellent 6 to 3 accumulation in the base as money moves in while the stock bases, getting rid of the weaker holders. Outstanding money flow as well. Looking for a strong breakout on a sharp surge in above average volume.
Volume: 70.8K Avg Volume: 103.859K
BUY POINT: $60.22 Volume=156K Target=$67.45 Stop=$59.18
POSITION: BIO IL - Sept. $60c (50 delta)
http://www.investmenthouse.com/cs/bio.html
Play Date: 05/01/2004
STRA (Strayer Education--$125.61; +0.55; optionable): Education & training. Forecast to announce a split on 5-4-04 in conjunction with its annual shareholder meeting or on 5-6-04 before the market opens in conjunction with earnings;
BACKGROUND: Last announced a 3 for 2 split on 9-29-97 in conjunction with a board meeting at a stock price of $43.30. The annual shareholder meeting is scheduled for
5-4-04 at 8:30 EDT. The company has sufficient share for a 3 for 2 split.
http://biz.yahoo.com/p/s/stra.html
STATUS: Breakout test. STRA moved out of a short 8 week cup with handle base in late march and has since moved more or less laterally, slowly climbing the 18 day EMA (121.86). Volume has started to swell the past week as it bumps up against 127. Friday it jumped well above average as it traded in this narrow range between the 18 day and 127. Money flow is leading higher and relative strength is already a breaking out, a very bullish sign. Looking for the stock to make a breakaway move on this stronger volume for us to move in.
Volume: 230.928K Avg Volume: 93.53K
BUY POINT: $126.78 Volume=165K Target=$129 Stop=$122.88
POSITION: SDQ GE - July $125c (55 delta)
http://www.investmenthouse.com/cs/stra.html
Continuing Pre-Announcement Plays:
Play Date: 05/01/2004
HUG (Hughes Supply--$55.89; +0.04; optionable): Plumbing Supply. Forecast to announce a split 5-20-04 at 10:00 ET annual shareholder meeting or on 5-25-04 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: Breakout test. HUG guided higher mid-April and gapped higher on strong trade. It ahs come back to partially fill that gap, holding at the 18 day EMA (55.66), holding that level with a nice tight doji. After a run higher and pullback, that often indicates the stock is ready to continue the breakout. Excellent money flow, and it held up very well in the market selling, easing back to test on lower volume.
Volume: 223.8K Avg Volume: 218.561K
BUY POINT: $56.88 Volume=314K Target=$65 Stop=$54.88
POSITION: HUG GK - July $55c (59 delta) &/or Stock
http://www.investmenthouse.com/cs/hug.html
Play Date: 05/01/2004
POOL (SCP Pool--$40.21; +0.38; optionable): Wholesale basic materials. Forecast to announce a split on 5-6-04 in conjunction with its annual shareholder meeting to be held at 9:00 CT.
BACKGROUND: Last announced a 3 for 2 split on 8-8-03 in conjunction with a board meeting. The stock price was $37.50. Prior to this last announced the following 3 for 2 splits: 7-30-01 in conjunction with a board meeting at a stock price of 38.60; on 5-11-00 in conjunction with the annual shareholder meeting at a stock price of $34. 3 for 2 splits were also announced in July 1998 and September 1997. The annual shareholder meeting is scheduled for 5-6-04 at which time authorized shares will be increased.
http://biz.yahoo.com/p/p/pool.html
STATUS: Breakout test. Solid earnings help boost POOL to a breakout from its 6 month cup with handle base. Volume shot higher on the breakout, but with the market selling hard the past week it was unable to advance. It did the next best thing, however, moving laterally over the 10 day EMA (39.70) and holding onto its gains. That is a sign of strength in a weak market. Looking for the break higher on solid trade to move in.
Volume: 283.021K Avg Volume: 178.796K
BUY POINT: $41.38 Volume=300K Target=$48 Stop=$38.88
POSITION: QCL GH - July $40c (55 delta) &/or Stock
http://www.investmenthouse.com/cs/pool.html
Play Date: 05/01/2004
UOPX (University of Phoenix Online--$87.08; -1.47; optionable): Education and training. Forecast 6-24-04 before the open in conjunction 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: 50 day EMA test. UOPX is criminally overdue for a split, but we cannot really complain as it has delivered nice gains all along. This test of the 50 day EMA (86.01) brought in some volume as the stock was supported at that level, bouncing up before closing. This looks to be providing another entry point for us.
Volume: 322.288K Avg Volume: 188.68K
BUY POINT: $90.25 Volume=285K Target=$103 Stop=$89.12
POSITION: UBY IR - Sept. $90c (44 delta) &/or Stock
http://www.investmenthouse.com/cs/uopx.html
PRE-SPLITS
Play Date: 04/29/2004
BCR (C.R. Bard--$106.27; -0.26; optionable): Medical instruments. Splits 2 for 1 on 6-1-04.
http://biz.yahoo.com/p/b/bcr.html
STATUS: Breakout test. Showing a nice doji at the 10 day EMA (106.12) on below average volume Friday as BCR continues to test the big move up a week back on the split announcement. This is often the indication of a resumption of the move. Nice breakout from the 2.5 month flat base, and now we look for the breakout to continue. Solid money flow and relative strength holding up well.
Volume: 352.6K Avg Volume: 407.04K
BUY POINT: $107.25 Volume=600K Target=$120 Stop=$103.22
POSITION: BCR GA - July $105c (62 delta)
http://www.investmenthouse.com/cs/bcr.html
Play Date: 04/29/2004
DNA (Genentech--$122.80; +0.90; optionable): Biotechnology. Splits 2 for 1 on 5-13-04
http://biz.yahoo.com/p/d/dna.html
STATUS: Breakout test. Another explosive move being tested on low volume as the market sells off on high volume. DNA again held the 10 day EMA (120.43) and then managed to rebound on the close to post a small gain. Tremendous money flow and relative strength moving up as the rest of the market sells. Waiting for the volume to return and DNA to start back up. Still enjoying the benefits of the cancer treatment drug boom.
Volume: 2.321M Avg Volume: 2.896M
BUY POINT: $123.25 Volume=4M Target=$133.45 Stop=$118.25
POSITION: DWN IE - Sept. $125c (53 delta)
http://www.investmenthouse.com/cs/dna.html
Play Date: 04/29/2004
HSY (Hershey Foods--$88.89; -0.01; optionable): Candy, etc. Splits 2:1 on 6-16-04
http://biz.yahoo.com/p/h/hsy.html
STATUS: Breakout test. Gapped higher Monday and has come back to test that move on lower volume, holding easily over the 10 day EMA (87.86) as the rest of the market distributed. Nice, tight dojis over 88 signal that HSY is preparing to continue the move.
Volume: 468.5K Avg Volume: 483.083K
BUY POINT: $89.42 Volume=708K Target=$98.75 Stop=$87.22
POSITION: HSY HR - Aug. $90c (45 delta)
http://www.investmenthouse.com/cs/hsy.html
POST-SPLITS
Play Date: 03/23/2004
ACV (Alberto-Culver--$47.16; +0.06; optionable): Personal products
http://biz.yahoo.com/p/a/acv.html
STATUS: Breakout test. Still moving laterally over 47 and below 48 , holding up very well as the market sold off. Volume, however, started to rise back above average Thursday and Friday as it showed dojis on the candlestick chart over 47 and as the 10 day EMA (46.68) rises to meet it. That will most likely set it off. Excellent money flow and relative strength breaking out as the stock moves laterally.
Volume: 664.1K Avg Volume: 419.595K
BUY POINT: New: $47.88 (orig. $45.48) Volume=700K Target=$53 Stop=$45.88
POSITION: ACV FI - June $45c (45 delta) &/or Stock
http://www.investmenthouse.com/cs/acv.html
Play Date: 04/27/2004
CNC (Centene--$33.5; +0.57; no options): Health care plans
http://biz.yahoo.com/p/c/cnc.html
STATUS: Cup w/handle. A big volume session Friday as CNC moved off the 10 day EMA (32.89), getting ready for the breakout move. Nice 27 week base using the 200 day SMA (30.29) on the low as support. Money flow continues to surge ahead of price, and it looks as if CNC is ready to follow it.
Volume: 309K Avg Volume: 118.304K
BUY POINT: $34.68 Volume=166K Target=$40 Stop=$32.25
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/cs/cnc.html
Play Date: 04/27/2004
COH (Coach--$42.6; -0.47; optionable): Accessories, handbags, etc.
http://biz.yahoo.com/p/c/coh.html
STATUS: Breakout test. Decided to test back in the market selling, doing it on lower volume and hold the 18 day EMA (42.49) Friday with a nice tight doji. Volume was above average but backed off on most of the test. Looks ready to try a bounce from here. Solid 6 week cup base sporting strong 4 to 0 accumulation. The base follows on the heels of a 3 month base formed December to February.
Volume: 1.553M Avg Volume: 1.479M
BUY POINT: $45.48 Volume=2M Target=$53 Stop=$43.25
POSITION: COH HI - Aug. $45c (58 delta) &/or Stock
http://www.investmenthouse.com/cs/coh.html
End part 2 of 3
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