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Begin Part 2 of 2

THE PLAYS:

Reading the Plays: Please note that when we reference the 10, 18, and 50 day moving averages (MVA), those are exponential moving averages (EMA). The 200 day moving average is always simple (SMA). We will note when we reference a particular MVA differently, e.g., a simple 50 day MVA. Please click on the Yahoo and chart links for company and charting information.

New note for reading plays: A "prior high" refers to the high at the start of a base.

BEST PLAYS: Breakout from APPB!

Stocks from Wednesday's report:
ANSS: Hit a low at 17.26 but recovered back over the 18 day MVA.
APPB: Breakout! The stock gapped up on the open and then headed up on great volume. Still a buy, but close to our limit (5% above the buy point).
KG: See Up & Comers Portfolio.
Indexes: The Dow and OEX did just what we said they would this morning, hitting resistance on the highs and tanking. Care needs to be taken with these downside plays, however, as a relief bounce could occur anytime with market down heavily three days in a row.

Previous plays:
SCOR: Still forming the handle, and is at support on below average volume. Looking for another day of consolidation.
SCRI: Holding support at the 18 day MVA.
BLL: Watch for a pullback.
ROST: Still moving up.
RESP: Showing life again on a move up from the 18 day MVA on strong volume.
MME: Completing a pullback to the 18 day MVA.
APOL: A strong move up today.
RI: Struggling as it sold back down toward its 18 day MVA on strong volume. Needs further consolidation.
ITRI: A low-volume pullback to support.
IXX: Don't like today's move but the stock held above the 50 day MVA.

Best Plays:
1) BJCT: Getting ready for another leg up.
2) SRCL: Looks ready to continue higher.
3) SEIC: Put play.

New: Biotechs had a decent day.

BAX (Baxter Intl--$52.55; +0.55; optionable (BAX): Health Services
http://biz.yahoo.com/p/b/bax.html
STATUS: A cup with handle pattern of 10 weeks. The handle is volatile, with volume the same, but the stock looks ready to move higher as volume is rising along with a move off of support today (the 10 day MVA at 52.16). Handle high is at 53.80, so look for a breakout over that price. Previous high in the base is 54.50, lows are at 47. The stock has held support above 52 for the last several days (save a dip lower Tuesday), and is showing good money flow and relative strength that has broken out ahead of price. Volume was up to average levels at 2.55 million. Target: 62-65
BUY POINT: 53.93, on minimum breakout volume of 3.7 million. Stop: 52.50
POSITION: Stock and/or November $45 or $50 calls to buy (BAX KI or KJ).

http://www.investmenthouse.com/cd/bax.html

|mktdly|Pivot=53.93 Cup /handle Tgt vol=3.7M Tgt $=62 Stop=25.05

A thinly traded stock:

BJCT (Biohect Medical--$12.17; +0.02; no options): Health Services
http://biz.yahoo.com/p/b/bjct.html
STATUS: Broke out of a double bottom pattern it formed at the bottom of a 12-week cup base and is now pulling back in a test of that run. BJCT hit a high of 12.30 last Friday at the top of its breakout run, and has pulled back in a lateral fashion since, with volume decreasing until today. Showing a tight doji after a test of apparently sturdy support at 12, volume shot back up to 97,800 (avg. 41,636). We are looking for another breakout move after this rest. Target: initial, 14.50 (highs at the start of the base).
BUY POINT: 12.43 on continued strong and rising volume. Stop: 11.50
POSITION: Stock only.

http://www.investmenthouse.com/cd/bjct.html

|mktdly|Pivot=12.43 Test BO Tgt vol=98K Tgt $=initial 14.50 Stop=11.50

Updates:

A rolling pattern:

SRCL (Stericycle--$45.82; -0.09; optionable (URL): Materials & Construction
http://biz.yahoo.com/p/s/srcl.html
STATUS: Tapped near the 200 day MVA on the low of 41.70 and bounced, just like it did earlier in the month before running up to 50. We are looking for a similar move here after SRCL first made the tap and then surged up on strong volume, nicely surpassing the opening price of 43.80. Volume was strong at 236,000 (avg. 163,000). We will look at taking positions on a move up from here, with stock and/or options. At the peak of the run (at 50), if the stock tops out and looks ready to move back down to the 44 range (where is has been finding support for the dips in the pattern), we can do one of the following: sell stock and/or options we bought at the bottom of the run, or hold the stock and sell covered calls on it as it moves back down. If 44 holds again, the process can begin again.
BUY POINT: 46, on continued rising volume, for a move up to the 50 range. Stop: 43
POSITION: Stock and/or November $45 calls to buy (URL KI).

http://www.investmenthouse.com/cd/srcl.html

|mktdly|Pivot=46 Rolling pattern Tgt vol=98K Tgt $=50 Stop=43

A cup with handle:

IMCL (Imclone Systems--$51.49; -0.04; optionable (QCI): Biotechnology
http://biz.yahoo.com/p/i/imcl.html
STATUS: Pulling back in the handle of its 11-week base, showing its second consecutive doji Thursday on rising volume of 1.25 million (avg. 1.4 million). Biotechs had a better day than most of the market today, and while IMCL didn't move up, it is still looking good in this developing pattern. The 10 day MVA is at 50, and IMCL can certainly test that support level in the handle before heading back up, but from there we are looking for a breakout over the August (handle) high of 54.22. IMCL has a nice 4-day run up last week and Monday, completing the right side of the base, which has a previous high at 56.30. The stock shows strong money flow and good buying. Target: 63-65
BUY POINT: Aggressive: 50, on rising volume after a pullback to the 10 day MVA. 54.35 on minimum breakout volume of 2 million. Stop: 52. A buy on the breakout up to 57.07.
POSITION: Stock and/or November $45 calls to buy (QCI KI).

http://www.investmenthouse.com/cd/imcl.html

|mktdly|Pivot=54.35 Cup w/handle Tgt vol=2M Tgt $=63 Stop=52

Puts/Shorts:

SEIC (Sei Investments--$40.70; -1.45; optionable (QEI): Asset Management
http://biz.yahoo.com/p/s/seic.html
STATUS: Crossed below the 200 day MVA (42.76) Tuesday, and hit a new closing low Thursday on a rise in volume to 449,200 (avg. 481,000). The stock has been in a down trend since early July, and on a move below the 40 level, we will look at playing it with some puts down to a target of 32.50.
BUY POINT: 39.75, on average or higher volume.
POSITION: December $50 puts to buy (QEI XJ).

http://www.investmenthouse.com/cd/seic.html

|mktdly|Pivot=39.75 Put Tgt vol=485K Tgt $=32.50 Stop=41 (QEI XJ)

From the member portfolio:

Indexes:

THE PORTFOLIOS: Each report, we look at these to see which is in a buy position. We don't cover them all each time, just the ones that look ready to pick up a few shares.

THE LEADERS:

New Leaders: ESRX, ACS, NVDA, DGX, EBAY, FRX, PSFT, ADVS, BMET.
Previous Leaders in which we are still interested: ADBE, SEBL, VRSN, VRTS

BMET: Biotechs had a decent day and this one surged back on strong volume, from beneath its 200 day MVA to close just above the 18 day. Can move up to the 50 day MVA at 29 (closed just a point below that).
ADVS: Still holding above the 200 day MVA despite another drop down to the 50.83 range (last week). Volume was strong and rising but the stock remains below resistance (short terms and 50 day MVA).
ACS: Sold on strong volume, closing below the 18 day MVA. The 50 day MVA is at 79.49.

UP & COMERS PORTFOLIOS:

LNCR, BJ, LOW, HI, THQI, BBBY, IGT, CHS, KG

IGT: Bounced on very strong volume, but the 50 day MVA slammed the door and that's where it stopped.
LOW: Sold below the trendline that was supporting its pattern, and the 50 day MVA. It bounced slightly off the low of 36.25 (support between there and 36).
HI: Below the 200 day MVA again. We are dropping the stock until and if it makes a strong recovery.
CHS: Sold back as well, on strong volume, but held at the 10 day MVA, above the 18 day at 35.03.
KG: Still looks good since it held above the 10 day MVA, but volume was strong and above average after having been below average for three weeks. It is holding up well, and even if it falls to the 50 day MVA at 42 will remain in decent shape.

MEMBER PORTFOLIO: New portfolio as selected by the subscribers. Some of these stocks are still struggling to move higher in their bases, and will likely continue to trade in close ranges just like the market. We'll be ready to catch them when they are ready to move. The new list: BRCM, CHKP, AMAT, JNJ, MSFT, AOL, HGSI, BUD, PXLW.

Old members: BRCM, CHKP, CSCO, EMLX, IDTI, INTC, JDSU, MVSN, NT, PWER, SUNW, VTSS

AMAT: Closed with a tight doji on lower volume; may attempt a bounce back up to 46 or higher (46 is the 50 day MVA).
JNJ: A doji below the 50 day MVA today, and on rising volume.
MSFT: Down three points and could fall further if the market continues to sell.
BRCM: At support, and will it hold? Volume was strong and above average (after being below average the previous 4 sessions).
AOL: Selling off for the third day. It will likely test the April lows (34).

Good Investing!
Jon L. Johnson and The Daily 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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