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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: DP continued its breakout despite the market today, and so did BLL! ICOS started a move up today; it pulled back but looks capable for the move up in the rolling pattern (covered call) play. DAP looks very good in the pennant pattern, showing a doji on low volume, and at support. ANSS looks good in its tight pennant, and K is tightening up in its test of the breakout. IMCL wants to move back up in its handle. STNR, covered in late July, is looking good now as it travels up the right side of its short base. Volume was very strong on a breakout move from a lateral-type movement of 4 days, but it's a little tight for taking positions here. We will look for a pullback. To wrap the upside plays, TIER is testing its breakout and looks like it wants to hold at 14 for a move up (volume continued to decrease today as the stock held with a tight doji). Look for a move over the breakout high of 14.65. Puts: SEIC has performed well as a put play; it headed down Wednesday and continued another 3 points today! Another put play that panned out today was PSFT on a break of the 30 support.
Stocks from Wednesday's report:
UFI: Still holding up in the ascending wedge pattern; volume was lower today.
ICOS: Hit the buy point today in the rolling pattern, but pulled back. It can still move up from here.
MCK: Looked very promising yesterday, but didn't follow through; at least it is holding at support in the pennant pattern.
QQQ: The index undercut Wednesday's low; it did not rally anywhere close to the 10 day MVA, much less the 18 day.
DJX: Undercut its August low.
Previous Plays:
FDO: Fell resoundingly from its ascending wedge as the stock lost over 7%.
ACTN: Pulling back to test, perhaps the 10 day MVA (26.80).
CAO: Slid below Wednesday's doji as volume decreased along with it. Support at 8.
BJCT: Completed the test to the 10 day MVA, showing a doji at that support.
BAX: Did not follow through on Wednesday's good-looking move up.
ITRI: Plopped down to the 50 day MVA; volume was quite low so we may get a bounce.
ROST: Hit another new all-time closing high but pulled back even as volume shot through the roof; it held to keep the new high, however.
SCOR: Looked nicer on the pullback in the handle until today, when it dropped down to the 18 day MVA; however, volume was even lower so SCOR may hold here. Don't like the move below 35 at any rate.
RESP: Consolidating at its 10 day MVA on lower volume today.
Best Plays:
1) GIS: Trying to break out on strong volume.
2) TRI: Ditto.
3) CMX: Another good-looking pattern.
4) SLNK: Breaking out and still a buy.
5) DJX: Ready for more downside.
New:
GIS (General Mills--$45.11; +0.20; optionable (GIS): Food and Beverage
http://biz.yahoo.com/p/g/gis.html
STATUS: The stock has formed an ascending wedge pattern in the upper right side of a 6-month cup base (prior high of 46.35). GIS has been in a pretty steady uptrend from the lows in the base around 37 (April). This consolidation (one of our favorite patterns for its strong breakout potential) may break the stock from the cup. GIS shows strong money flow, and relative strength is breaking out ahead of price, a bullish indicator. Target: 52
BUY POINT: 45.49 on minimum breakout volume of 1 million, preferably higher (Thursday's volume was 907,600; avg. 764,500). A buy on breakout up to 47.76
POSITION: Stock and/or October $40 calls to buy (GIS JH).
http://www.investmenthouse.com/cd/gis.html
Update:
TRI (Triad Hospitals--$36.70; +0.72; optionable (TRI): Health Services
http://biz.yahoo.com/p/t/tri.html
STATUS: In an ascending wedge pattern that formed after TRI broke out of a flat base that stretched since last fall (October), the recent breakout occurring mid-August. Thus, the pattern is functioning as a test of the breakout, and we like the positioning of the pattern as it comes after the double bottom breakout (the double bottom developed at the end of the overall flat base). Support has been firm at the 10 and 18 day MVAs in the wedging pattern, and TRI moved up from the former support on a surge in volume Thursday (434,800; avg. 432,409), hitting a new all-time closing high. It still has to take out Tuesday's high of 37.15, which was matched by today's high. We are looking for a breakout from here. Target: 43
BUY POINT: 37.28, on minimum breakout volume of 584,000. Stop: 35. A buy up to 39.14 on the breakout.
POSITION: Stock and/or October $35 (TRI JG) or November $30 (TRI KF) calls to buy.
http://www.investmenthouse.com/cd/tri.html
CMX (Caremark--$17.58; +0.08; optionable (CMX): Health Services
http://biz.yahoo.com/p/c/cmx.html
STATUS: In an ascending wedge pattern that formed above the 50 day MVA (16.88) and after the stock made a breakout mid-July to a high of 18.50 (thus it is in a short cup/flat base). CMX uptrended beautifully since April of last year, and its recent behavior has been to make monthly bounces from the 50 day MVA since a late April 2001 breakout. Currently, the stock is showing a tight doji on low volume (570,300; avg. 1.4 million), volume that has fallen back for the last three days, generally following the stock on its pullback to the 10 day MVA (17.40). Looks ready for a move up and breakout if it can pull in the buying volume. Showing outstanding money flow, and high relative strength. Target: 21
BUY POINT: 18.05, on minimum breakout volume of 1.9 million. Stop: 17 (just under the 18 day MVA, 17.23). A buy up to 18.95 on the breakout.
POSITION: Stock and/or December $15 calls to buy (CMX LC).
http://www.investmenthouse.com/cd/cmx.html
SLNK (Spectralink--$18.70; +1.83; optionable (SXU): Telecom Equipment
http://biz.yahoo.com/p/s/slnk.html
STATUS: Breaking out of a 14.5-month cup with handle base that formed at the bottom of an 18-month cup base. Volume was very strong at 842,700 (avg. 290,318). Buy point was 18.31 so the stock remains a buy on this move up to 19.23 (5% above the buy point). SLNK shows surging money flow and a breakout in relative strength. Initial target: 21-22. We covered the stock in early August as it tested the breakout from another cup with handle base that is inside the current one.
BUY POINT: Remains a buy up to 19.23. After that, we will wait for a test of the breakout and move back up for taking new or add-to positions. Stop from here: 16.50
POSITION: Stock and/or December $15 calls to buy (SXU LC).
http://www.investmenthouse.com/cd/slnk.html
Indexes:
DJX (1/100 Dj Indu--$98.41; -1.92; optionable (DJV):
STATUS: Couldn't muster a move over its 10 day MVA (100.64) in today's action, for the upside play to 102. Instead, the index opened at its intraday high and headed down from there, garnering nearly 2 points on the move. Volume was slightly down but still strong at 1.34 million (avg. 1.1 million). We are looking for a continued move down after today's move below the August low (98.69). Once below 98, it can fall to 94 (or the March low near 91). The index may move up early to test the August low or today's closing price if it opens lower, but we can look at entry points on a move back down from there.
BUY POINT: 98 on rising volume in continued market selling. May give an early move up to test the 98.50 range before heading back down ("the kiss good-bye").
POSITION: October or November $102 puts to buy (DJV VX). Deltas unavailable at the time of this writing. Please check with your broker for deltas of 0.70 or higher.
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
NVDA: Get ready for a fall to the range of 72; the stock isn't getting back over support at 80 and closed near the low after tapping resistance.
PSFT: Yesterday's doji was a head fake; the stock headed back down today, falling nearly 3 points after breaking our targeted support at 30.
FRX: Closed back below the 50 day MVA (but above the 10 day), showing a doji on lower volume. It is having trouble sticking to a move over 75.50.
BMET: Once again moved over its 50 day MVA but once again dropped back, this time closing lower.
ADVS: Finally broke through the 200 day MVA and was so ready that it dropped over 6 points. Wish we had been in on that move.
ACS: A doji at the 50 day MVA and looks ready to hold there.
UP & COMERS PORTFOLIOS:
LNCR, BJ, LOW, HI, THQI, BBBY, IGT, CHS, KG
IGT: The stock is squeezing between the 50 day and 10 day MVAs, so it may give an upside pop; it has not tested near its 18 day or 200 day MVAs (below) in three days, and volume continues to decrease.
BBBY: Heading for 27 (200 day MVA).
CHS: Retail stocks sold off today, but this one managed to hang together with a lower volume pullback to support, and showed a doji. It is in position to move up or at least hold at the 10 day MVA.
LOW: Sold further below the 50 day MVA (down almost 2 points on high volume).
KG: Can drop to the 200 day MVA at 36 if it breaks support at the 40 range (October $45 puts to buy (KG VI) on 2 million+ 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
Tech did not look good today (AMAT and MSFT). JNJ defied the market, however:
JNJ: Popped higher ($0.70) on stronger volume. It has a high of 58 hit Tuesday that it has to defeat.
BUD: Closed back down, stopping at the 200 day MVA as volume dropped lower (still above average). This one is holding up fairly well considering, and eventually may manage a breakout from the flat basing pattern it has developed since May. It is in a kind of ascending wedge pattern right now.
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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