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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 DP! The stock remains a buy on this move up to 43.34; it can always move higher, but we won't chase positions on a move over that price, since it is 5% above the breakout point (we will instead wait for a test of the breakout). Other stocks that look great are BAX and MCK: BAX made a strong move up from support and MCK looks ready to move up into its breakout as volume rose nicely! FDO looks good in its ascending wedge (see the 9-01 report for buy points and other details). APPB posted a new all-time closing high on great volume and can continue up from here on the momentum. We are keeping an eye on CMX (a health services stock covered in mid-June) as it forms an ascending wedge as a bottom to its short base.

Stocks from Tuesday's report:
DAP: Moved down in the pennant, but is holding support on low volume.
DP: Breakout!
CFFN: Made a slight move up in its test of the breakout, but volume dropped back.
ACTN: Pulled back as volume dropped back sharply below average.
BRCM: Is going to hold support, at least for now (was a put play last night).

Previous Plays:
MHK: Got hit with profit-taking after a nice 2-day breakout. Stopped out.
CAO: Holding with a tight doji in its pullback from the breakout.
FDO: Pulled back on lower volume in the ascending wedge.
BJCT: Tapping support at the 10 day MVA (just above 12) on higher volume.
BAX: Still looks good in its handle after bouncing from a test of the 50 day MVA Tuesday and making a solid move up today. Covered 8-30 (for buy point, etc.).
SEIC: See below ("Puts" section).
ANSS: The pattern still looks very good if the stock can hold on; volume shot up well above average!
ITRI: A tight doji above support, and on low volume.
K: Showed a tight doji at support (10 day MVA), up from a low of 31.45. Volme was lower.
PATH: Stopped out as the stock broke below the 50 day MVA.
IMCL: May test the 18 day MVA again, like it did today, if the 10 day MVA can't hold it.
ROST: Pulled back on much lower volume.
TIER: Showing its second doji above the 10 day MVA (tapped the last 4 days on the lows). Volume below average.

Best Plays:
1) UFI: A nice pattern.
2) ICOS: Looks ready to roll back up.
3) MCK: Ready to break out.
4) Indexes: QQQ and DJX look ready to move up.

New:

UFI (Unifi--$10.02; +0.04; no options): Textile Manufacturing
http://biz.yahoo.com/p/u/ufi.html
STATUS: In a tightly compressing ascending wedge pattern that has support at the 18 day MVA (9.84. The stock got a stronger shot of volume Wednesday (77,000; avg. 107,000) and it moved up from a tap at higher support, the 10 day MVA (9.91). We look for a breakout over upper resistance at 10; actual pattern high is at 10.08, but UFI has hit 10 several times in the pattern. Showing super money flow and high relative strength. Target: 12
BUY POINT: 10.13, on minimum breakout volume of 144,000. Stop: 9.50 A buy on a breakout up to 10.64.
POSITION: Stock.

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

Another rolling pattern:

ICOS (Icos Corp--$57.67; +0.08; optionable (IIQ):
http://biz.yahoo.com/p/i/icos.html
STATUS: We mentioned on the weekend report the emergence of more rolling ranges in stocks. ICOS is doing the same, since early July rolling roughly between 56.50 and 63.50. Currently the stock is at a dip in the pattern, the perfect place to initiate an upside play. Showing a doji at the bottom of a 6-day decline, and with volume decreasing nicely the last 2 days, ICOS looks ready to move higher. If so, we will look at purchasing stock for the move up to the 63 range, and once there, on topping action and a turn back down, we can look at selling covered calls on the purchase. Or, once it tops, we can simply sell the stock, or sell call options that were purchased on a move up from here. Volume was down to 186,100 (avg. 552,000). ICOS has formed the rolling pattern at the bottom of a 13-week base that has a prior high of 70.10. We will keep our eye on the stock for a breakout from the rolling pattern, which can help it complete the right side of the base.
BUY POINT: 58, on rising volume. Stop loss: 55. On topping action at 63-63.50, sell the covered calls and/or stock or call options.
POSITION: Stock and/or October $50 calls to buy (IIQ JJ).

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

Update:

MCK (Mckesson--$40.42; +0.41; optionable (MCK): Drugs Wholesale
http://biz.yahoo.com/p/m/mck.html
STATUS: Making a good move up in the pennant pattern as volume surged to 1.4 million (avg. 1.43 million). The stock crossed over its short term down trendline (that was squeezing it down into the tail of the pattern), and we are looking for that breakout. Great money flow, and relative strength is out and ahead of price. Target: 48-50
BUY POINT: 41.63, on volume of 1.9 million or higher. Stop: 39 (18 day
MVA, 39.58).
POSITION: Stock and/or November $35 or $37.50 calls to buy (MCK KG or KU).

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

Indexes:

QQQ (Nasdaq 100-$35.33; -0.14; optionable (QQQ):
STATUS: A strong reversal considering this market, and the index may give us a run back upside on continued momentum; the QQQ showed a tight doji at the top of its intraday range (hit a low of 34.15 then surged back up as volume shot to 95.4 million by day's end). Average volume is 58.5 million. We will look for a quick upside play to the range of the 18 day MVA at 37.97, but watch the 10 day MVA for potential resistance at 36.97 on the way up.
BUY POINT: Aggressive: 36, on continued rising volume. We are not looking to play this one any higher than the 18 day MVA. From there, we can look at playing the index back down if it shows it isn't going to take out resistance, for a move back down to the 34 range. Put: After a move up to 37.97, entry points at 37 on a move back down in market selling (target 34).
POSITION: Upside Aggressive: October or December $35 calls to buy (QQQ JI or LI).
Put: October or December $43 puts to buy (QQQ VQ or XQ). Deltas unavailable at the time of this writing. Please check with your broker.

DJX (1/100 Dj Indu--$100.33; +0.36; optionable (DJV):
STATUS: A reversal today on strong volume (1.36 million; avg. 1.1 million). We are looking for a move up from the doji (formed near the intraday high of 100.66; the index surged up from a low of 98.86) for a run to 102, level of previous support and resistance. Once there, if the index does not move higher (the 18 day MVA is also adding to potential resistance), we will look at playing it back down to 98-100.
BUY POINT: Upside aggressive: 100.50 on continued rising volume. Stop: 98
Put: On a move down from 102 in market selling.
POSITION: Upside aggressive: October $100 calls to buy (DJV JV). Put: October or November $102 puts to buy (DJV VX or WX). Deltas unavailable at the time of this writing. Please check with your broker.

Previous puts: We want to mention that BRCM held support at 30; we were looking for a put play if the stock took that out on market selling. No so on today's reversal. Also, SEIC gave us a good move down today (almost two and a half points). That put play was on the report 8-30.

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

PSFT: Stopped the downside and showed a doji at the level of Tuesday's closing price.
FRX: Just managed to close over its 50 day MVA, and volume was higher, too. Look for a move over the 18 day MVA (75.44) on rising volume.
BMET: Made another run at the 50 day MVA, but volume was lower. At least it didn't retrace the move like it did Tuesday.
ADVS: Threatening again to break support at the 200 day MVA
ACS: Heading for a test of its 50 day MVA (just under 80).
DGX: Showing decreasing volume as it sticks to the underside of its 18 day MVA. Can drop to 60 or lower if it loses its hold.

UP & COMERS PORTFOLIOS:

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

CHS: Reported after the bell on same-store sales that rose over 16%--strong! On the sessions the stock was down, but bounced from support. Look for a move over Tuesday's high of 39 on rising volume (in the range of 565,000) for positions with stock and/or November $33.38 calls to buy (COJ KT).
THQI: Still below the 50 day MVA though it bounced from a low of 48.73.
LOW: Struggling, and closed just under the 50 day MVA; volume was higher as the stock fought back from a low of 35.65.
KG: Sold back below the 50 day MVA on strong volume.

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: Showed a tight doji after bouncing back from a low at 40. Volume was strong, and we might get a move up to about 44 (18 day MVA, or even the 50 day MVA just under 46.
MSFT: Another reversal on a bounce from the 55 range. Strong volume on a solid move up. The 10 day MVA is at 59.11, and the stock has potential resistance in the 60 range.
BRCM: 30 is holding it; strong volume can move it higher from here. 18 day MVA is at 35.73. Tapped the 10 day MVA on the high of 33.36.
JNJ: Holding steady but volume dropped off. Can fill the gap on a move down to the 18 day MVA (54.45).
BUD: Food and beverage stocks did well today; BUD surged back over the down trendline but volume was lower (still strong at above average levels, however), and the stock has the August top (44.44) and July top at 44.95 with which to contend.

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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