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stock research, stock picking
Begin part 2 of 3
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
June 24
Durable Orders, May (08:30): 1.6% expected and -3.2% prior
Initial Claims, 06/19 (08:30): 340K expected and 336K prior
Help-Wanted Index, May (10:00): 40 expected and 38 prior
New Home Sales, May (10:00): 1120K expected and 1093K prior
June 25
GDP-Final, Q1 (08:30): 4.5% expected and 4.4% prior
Chain Deflator-Final, Q1 (08:30): 2.6% expected and 2.6% prior
Michigan Sentiment-Rev., June (09:45): 95.0 expected and 95.2 prior
Existing Home Sales, May (10:00): 6.50M expected and 6.64M prior
SUBSCRIBER QUESTIONS
Q: In the Economy section you refer to the "ECRI" that comes out every Friday. What do the letters stand for and where is it reported? Thanks for the discussions on "supply side economics", its making some sense to me now.
A: ECRI is the acronym for Economic Cycle Research Institute. It is a private entity that studies various aspects of the US and other world economies such as acceleration and deceleration and inflation prospects. The Conference Board puts out the LEI (Leading Economic Indicators) made up of a basket of 10 indicators. ECRI looks at several more indicators it has determined, after extensive study, give a faster and more accurate indication than other similar methods. By faster we mean it provides a more timely indication. The accuracy is historically proven with accurate calls of the 2001 recession, the end of the 'Goldilocks' economy back in June 1999, and the Japanese recovery.
It has an impressive track record looking back, but it has a lot of the same problems of other indicators during the heat of battle. It gives indications, but you have to put them in context and figure out why they are showing what they are showing. Back in 2002 we were seeing an upturn in many points in the economy, but the ECRI was overstating some continuing slowdown. While it was picking up some of the same signs of improvement, they were overweighted by some continuing problems that were still worsening. Thus it blurred the potential recovery that was developing. ECRI was still pessimistic as we were turning optimistic. We received a subscriber question at the time regarding that discrepancy, and our answer was the same: ECRI offset the improved indicators with some that were still declining though they may have been a bit more lagging.
Nonetheless, it is a good indicator, particularly when looking at the trend. Right now it still shows a continuing decline in the annualized 4-week growth rate. It was down for the fifth straight week to 3.6% from 4.1%, a 13 month low. That is forecasting continued expansion, but at a slower pace in the second half. If the economy is not growing as fast, that puts pressure on stocks to advance their prices.
THE PLAYS
Good movers Friday: AXCA; BID; PLXT; RSAS
Thursday night play results:
MBT: Took a low volume pause. Still ready to move higher.
REV: Also paused on lower volume.
RVI: Volume was still up but it held flat for the session.
UBET: Went the wrong way.
New Plays:
Upside:
Play Date: 06/19/2004
GSLI (GSI Lumonics--$14.70; +0.13; optionable): Scientific & technical instruments
http://biz.yahoo.com/p/g/gsli.html
STATUS: Cup w/handle. Volume surged Friday lifted GSLI off the bottom of its handle that has been holding the 18 day EMA (14.31) on the lows. Nice action in its 9 week base sporting outstanding 4 to 0 accumulation (4 up price weeks on rising volume to 0 down price weeks on rising volume). Money flow is screaming higher ahead of price, and it looks as if GSLI is just about ready to follow it and give us a strong breakout.
Volume: 251.5K Avg Volume: 100K
BUY POINT: $15.32 Volume=150K Target=$18.39 Stop=$14.25
POSITION: HQJ JC - Oct. $15c (51 delta) &/or Stock
http://www.investmenthouse.com/ci/gsli.html
Play Date: 06/19/2004
ORB (Orbital Sciences--$13.65; +0.55; optionable): Aerospace/defense
http://biz.yahoo.com/p/o/orb.html
STATUS: Cup. A very shallow 17 week pattern that mostly formed along the 50 day EMA (12.70), a sign of good institutional support. Accumulation is a strong 6 to 3, and volume jumped higher as the stock surged Friday along with a few other defense stocks. Strong money flow moving higher ahead of price, and the stock is now starting to follow it. Hitting a multiyear high, so not going to have a lot of overhead supply to push it back down.
Volume: 618.7K Avg Volume: 291.089K
BUY POINT: $13.78 Volume=437K Target=$16.55 Stop=$12.82
POSITION: ORB LV - Dec. $12.50c (76 delta) &/or Stock
http://www.investmenthouse.com/ci/orb.html
Play Date: 06/19/2004
RSTO (Restoration Hardware--$7.81; +0.33; optionable): Upscale home furnishings, hardware
http://biz.yahoo.com/p/r/rsto.html
STATUS: Cup w/handle. Retail is still solid as the consumer is far from finished. RSTO is ready to make the breakout move from an 8 month base sporting solid 7 to 5 accumulation. Volume has been very solid the past month, showing great price/volume action (up on up sessions, down on down sessions). Friday volume was back up as RSTO moved toward the highs in the handle, following that surging money flow. Just needs to make the break on continued strong trade.
Volume: 747.831K Avg Volume: 545.093K
BUY POINT: $7.96 Volume=818K Target=$9.68 Stop=$7.37
POSITION: URF KU - Nov. $7.50c (62 delta) &/or Stock
http://www.investmenthouse.com/ci/rsto.html
Play Date: 06/19/2004
TDS (Telephone & Data Sys.--$70.02; -0.16; optionable): Wireless telecom
http://biz.yahoo.com/p/t/tds.html
STATUS: Cup w/handle. TDS has come back and formed the handle to its 15 week base, using the 50 day EMA (69) as the handle support. Good sign as that shows big money stepping in at that level. Accumulation in the base is a solid 3 to 1 and money flow is really running higher ahead of the price. We are looking at this one as a trade, using options to give us a lot of leverage. If it goes further, great, but in any event it looks to be set up very well to make the bounce and give us a nice return.
Volume: 231.1K Avg Volume: 248.056K
BUY POINT: $70.64 Volume=372K Target=$76.68 Stop=$68.78
POSITION: TDS KN - Nov. $70c (55 delta)
http://www.investmenthouse.com/ci/tds.html
Play Date: 06/19/2004
VCLK (Valueclick--$11.34; +0.29; optionable): Online advertising and marketing
http://biz.yahoo.com/p/v/vclk.html
STATUS: Cup w/handle. A nice 10 week base has formed using the 200 day SMA (9.86) as the low of the cup and the 50 day EMA (10.79) as the support for the handle. That is a good sign of investors supporting the stock when it dips. Volume was up Wednesday and Friday as VCLK posted positive gains; in short, the price/volume action is solid in the handle. Accumulation is a strong 3 to 1, setting the foundation for the breakout as money has continued to move in as the stock based. Money flow is racing higher ahead of price. Good combination and we are looking for VCLK to give us a breakout over the recent highs this week.
Volume: 1.033M Avg Volume: 953.18K
BUY POINT: $11.68 Volume=1.4M Target=$14 Stop=$10.97
POSITION: QCS IB - Sept. $10c (79 delta) &/or Stock
http://www.investmenthouse.com/ci/vclk.html
End part 2 of 3
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stock research
stock picking
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