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Begin part 3 of 3

THE PLAYS

Wednesday evening play results:
BIOM: Still in the low volume 50 day EMA.
CCI: Held up well, holding above the 10 day EMA on lower volume.
ELGX: Low volume breather, still holding the 10 day EMA and ready to make its move.
UTSI: Nice move lower and ready for more downside.

New Plays:

Upside:

Play Date: 01/20/2005
ACO (Amcol Intl.--$20.11; -0.1; optionable): General building materials
http://biz.yahoo.com/p/a/aco.html
STATUS: Flat base. ACO is moving up to the breakout from its 12 month base. Excellent 14 to 5 accumulation in the base (14 up price weeks on rising volume to 5 down price weeks on rising volume), showing strong accumulation during the base. That sets up the breakout and subsequent run. Volume has rallied the past week as ACO moves to the top of its range after making two higher lows off of its 50 day EMA (19.47; basically formed a short double bottom with handle starting December). Looking for it to make the break higher soon, clearing the recent highs on continued strong trade.
Volume: 248K Avg Volume: 137.954K
BUY POINT: $20.85 Volume=250K Target=$24.55 Stop=$19.78
POSITION: ACO FD - June $20c (57 delta) &/or Stock
http://www.investmenthouse.com/cd/aco.html

Play Date: 01/20/2005
AVO (Advanced Medical Optics--$41.51; -0.74; optionable): Medical instruments
http://biz.yahoo.com/p/a/avo.html
STATUS: Flat base. AVO is easing back to test the 50 day EMA (40.77) as it prepares for the breakout from a 7 month flat base. It is using this market selling to ease back and set up the final breakout from this nice long base sporting solid 7 to 4 accumulation. It is ready to make a breakout to an all-time high, another leadership stock that is using the recent selling to its own benefit. Excellent action and just waiting for the test to run its course and deliver the new breakout.
Volume: 774.8K Avg Volume: 801.227K
BUY POINT: $42.78 Volume=1.2M Target=$49.88 Stop=$41.05
POSITION: AVO DH - July $40c (64 delta) &/or Stock
http://www.investmenthouse.com/cd/avo.html

Play Date: 01/20/2005
USU (Usec--$10.71; -0.15; optionable): Industrial metals and minerals
http://biz.yahoo.com/p/u/usu.html
STATUS: Double bottom w/handle. Tuesday USU jumped on very strong volume, starting the breakout from a nicely formed 15 week base. Strong 5 to 2 accumulation in the base shows net buyers and has set up the breakout move. USU eased back some Thursday on lower trade. A solid base that formed roughly at the 50 day EMA (10.11), an important support level. Money flow is leading higher, and USU looks ready to follow it.
Volume: 652.1K Avg Volume: 442.136K
BUY POINT: $11.01 Volume=663K Target=$13.25 Stop=$10.45
POSITION: USU DB - Apr. $10c (81 delta) &/or Stock
http://www.investmenthouse.com/cd/usu.html

Downside:

Play Date: 01/20/2005
ABFS (Arkansas Best--$39.87; -0.99; optionable): Trucking
http://biz.yahoo.com/p/a/abfs.html
After Hours: $39.91
STATUS: Put. Arkansas Best has hit a pothole and has a flat. It peaked in late December on low volume, an indication that the big buyers were no longer involved. It then started selling hard this month on rising volume, a sign that the big money had not only stopped buying but was now selling. It broke the 50 day EMA (41.83) the first week, sold hard, and has now rebounded to test that breakdown. It rolled over Thursday on a volume surge. Looking to move in as it continues lower. A move to the target gives us a 42%ish gain.
Volume: 484.582K Avg Volume: 252.636K
BUY POINT: $39.75 Volume=265K Target=$37.75 Stop=$40.24
POSITION: FDQ OH - Mar. $40p (-48 delta)
http://www.investmenthouse.com/cd/abfs.html

SUBSCRIBER PORTFOLIO: These are stocks subscribers suggest by vote that we put in a portfolio to track and move into the stocks if they perform well. If you have any suggestions for additions or deletions, email us. We don't cover them all each report, just when something interesting is developing.

BR, COH, EASI, EBAY, GTRC, HDWR, JNPR, MSFT, QCOM

EBAY: Imploded on the first earnings miss in three years, gapping below the 200 day SMA (92.06). After such a tank a stock will provide a relief bounce at some point to test the important 200 day SMA it broke. Depending upon the strength of the move we can use that as an exit point or one to sell calls against positions. After a miss such as this and a gap down, the prognosis for recovery is long term. EBAY did not suddenly become a loser, but it had a lot of invincibility built into its stock price, and that was removed Thursday.

QCOM: Its guidance gapped it lower and it closed at the 200 day SMA. Not much to do with that kind of gap. Looking for a relief bounce to provide a better exit point.

SUBSCRIBER WATCHLIST

We continually receive ideas for potential plays from subscribers. Many times they are already on our watchlists, other times not. We always take a look and sometimes find a gem or two, or more. We don't necessarily endorse these, but want to provide a forum for subscribers with ideas that may appeal to other subscribers. We may just put on the ticker or we might describe our thoughts as to why or why not we think it is a buy or sell. This is a way we can all learn a bit more and maybe find a few more candidates to make us some good money.

Upside:

MIPS: Surging higher on volume Thursday, reversing a harsh Wednesday sell off. The stock broke out in late October and has run up the 18 day EMA (10.23) since. It ahs made 4 bounces off of that support. A strong stock will make 4 to 5 runs up that support after a breakout before needing a deeper test. With the fourth bounce, it is much more aggressive to play this move. You can also tell when a move is starting to get long in the tooth when the moves, both up and down, become much larger. The last bounce was the biggest. The stock has moved 10%, down and up, each of the past two sessions. That volatility in the run indicates deterioration in the move just as it does with the overall market. Still a very strong stock and it may run even higher from here. It is showing the characteristic signs of trouble, however, and this may not be the best entry point. A deeper test to the 50 day EMA that holds and generates another high volume bounce off that level is a safer entry as a stock will often continue another run up the 18 day EMA from there.

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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