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Begin Part 2 of 2
Support and Resistance Levels
Nasdaq: Closed at 1687.70.
Resistance: 1750. 1817 (mid-August low), then the down trendline at 1840. 1935 to 1940 stopped the last move higher.
Support: 1700 did not hold, and there is no real support level down to the low at 1619.58. Could drift down toward there early in the week.
S&P 500: Closed at 1085.78.
Resistance: 1125. Then 1150, followed by 1165 to 1170.
Support: The low is 1081.19.
Dow: Closed at 9605.85
Resistance: 9885, followed by 10,000. Then 10,120 and 10,200. After that, 10,400. 10,600 is strong resistance.
Support: 9600 will try, but it most likely won't hold up. 9500 is a prior resting point, but nothing hard. The closing low is at 9389.48 and the intraday low is at 9106.54.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
9-10-01
Consumer Credit, July (15:00): $3.8B versus -1.5B prior.
9-12-01
Current Account, Q2 (10:00): -$106.0B versus -$109.6B prior.
9-13-01
Initial Claim, 9/8 (8:30): 405K versus 402K prior.
Export Prices ex-ag., August (8:30): -0.5% versus -0.5% prior.
Import Prices ex-oil, August (8:30): -1.0% versus -1.0% prior.
9-14-01
PPI, August (8:30): 0.1% versus -0.9% prior.
Core PPI, August (8:30): 0.1% versus 0.2% prior.
Retail Sales, August (8:30): 0.4% versus 0.2% prior.
Retail sales ex-auto, August (8:30): 0.4% versus 0.2% prior.
Industrial Production, August (9:15): -0.1% versus -0.1% prior.
Capacity Utilization, August (9:15): 75.8% versus 77.0% prior.
Mich. Sentiment-Prel., September (9:45): 92.0 versus 91.5 prior.
SUBSCRIBER QUESTIONS
Q: After playing [the indexes] for the last few weeks with much success it is clear the SOX is the most volatile. My question is aside from the pricey options, are their any other negative factors to them?
A: Not as far as we are concerned. One of the things we really like about the SOX is that it acts like more than just one stock but less than a big index. In other words, it tends to give more indications of its immediate moves just as an individual stock does without the risk associated with playing just one stock that is subject to news. For instance, after Friday's close we really like what we see in the SOX for at least a quick move higher. We can get in fast when it starts, and use the volatility to make at least a quick gain on a rally. We can then either sell out, sell part of the position to take some profits and continue the upside if things still look positive, or let it all ride. The speed of the move, the volatility, helps us get profitable faster. On the downside as you note, it can turn on us fast as well.
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: Several plays are holding up despite last week's action; we still like ANSS, DAP, TRI (if it can hold support), ICOS, MCK, BJCT, BAX and IMCL (covered below). TIER made the move over 14.65 that we noted in Thursday night's report; volume was strong on the move and the stock looks like it has more upside left (target is 17). IGT is covered as a put play in its sections. We are also looking at a possible role up by BRCM once again; at support and if the chips move up, it can give us a nice move.
Stocks from Thursday's report:
GIS: Tried to move higher on strong volume, but couldn't make the buy point. Look for a pullback.
TRI: The wedging pattern looks good, but volume was higher on the pullback. Still holding above the 10 day MVA.
CMX: Selling on stronger volume; closed a cent below the 50 day MVA.
SLNK: Added to the breakout on stronger volume, but may be ready for a pullback.
DJX: Made a good move down for the put play.
Previous Plays:
ANSS: Holding up well in its pattern; buy point is19.70, on minimum breakout volume of 184,000 (8-29 report).
DAP: Looks good in the pennant pattern as volume shakes out to very low levels (9-04).
TRI: Covered 9-06. Hanging in there in the ascending wedge-type pattern, but volume was higher and above average on Friday's pullback. Watch for a break of the 10 day MVA (35.95).
ICOS: Our covered call play in the rolling pattern that is still holding on at the dip in the pattern. We are looking for the roll up to 63 (9-05).
MCK: Still looks great in the pennant pattern (9-05).
BJCT: Has pulled back a bit farther than we would like, but in this market allowances can be made. Holding up above the short term MVAs in the pullback (8-30).
BAX: Dropped back to test the 18 day MVA, and closed higher and above the 10 day MVA. Not a great pattern over the last few days, but it is trying to hold on (8-30).
Best Plays:
1) ESST: Going for the 50 day MVA after finding support.
2) MOGN: Ready to head higher.
3) IMCL: Looks headed for a breakout!
4) IGT: Put play.
Semiconductors: Looks as if is showing a possible bottom, and several component stocks look ready to make moves up. We are looking at some of those for upside positions, including SMTC, which has been covered since the end of June.
SMTC (Semtech--$36.09; +1.30; optionable (QTU): Integrated Circuits
http://biz.yahoo.com/p/s/smtc.html
STATUS: In a year-long base (prior high near 60) that bottomed at 15. The stock crossed back over its 200 day MVA at the start of a strong July run back up (to the August high of 41.70). From there the stock corrected back to the 50 day MVA on low volume (except for a couple of days of selling in the middle of the pullback) and made a decent rebound from the moving average through the end of August. The last 2 days of the week SMTC again tested the 50 day MVA (now at 34.37), bouncing Friday on stronger volume of 1.48 million (avg. 1.08 million). It closed just under the 18 day MVA after tapping above the higher 10 day MVA (36.47), so we will look for a move over the upper resistance. Our initial target on this play is the August high.
BUY POINT: Aggressive: 36.50 on continued rising volume. Stop: 33.80
POSITION: Stock and/or October or December $35 calls to buy (QTU JG or LG).
http://www.investmenthouse.com/cd/smtc.html
ESST (Ess Technology--$12.00; -0.10; optionable (SEZ): Specialized
http://biz.yahoo.com/p/e/esst.html
STATUS: ESST is in a base of almost 20 months and since last October has formed a cup with handle, currently pulling back in the handle. The pullback has been rather steep, taking the stock back below the 50 day MVA (12.23), but ESST appears to have found support on the low of 11.14. The stock bounced from there and on rising volume (215,200; avg. 361,454) headed higher, though it did close below the 50 day MVA. As the chips rally, we are looking for a move over this major resistance for an aggressive play up to the August (handle) high of 16.12. That is our intial target; beyond that, we can look at a new target on a breakout from the cup with handle. ESST shows good money flow.
BUY POINT: Aggressive: 12.36, on volume in the range of 290,000. Stop: 11.49
POSITION: Stock and/or October $10 calls to buy (SEZ JB).
http://www.investmenthouse.com/cd/esst.html
New:
A Trading Play:
MOGN (Mgi Pharma--$15.75; +1.48; optionable (QOG): Drug Manufacturers
http://biz.yahoo.com/p/m/mogn.html
STATUS: The stock is in an 18-month base, off the March lows near 7.50, and Wednesday of last week made a good move back over its 200 day MVA at 13. It headed up for 2 days until Friday when volume absolutely rocketed up to 1.18 million (avg. 103,000), sending the stock into a much stronger breakout. We look for a continued move up on the momentum, then a pullback for possible add-to positions. This one is not a long-term investment at this point, but a trade up to a target of 22. MOGN has strong money flow (which broke out), and buying is looking good.
BUY POINT: Aggressive: 16.15, on continued strong volume. Stop: 13
POSITION: Stock and/or October $12.50 calls to buy (QOG JV). Deltas were unavailable at the time of this writing; please check with your broker for those of 0.75 or higher.
http://www.investmenthouse.com/cd/mogn.html
Update:
IMCL (Imclone Systems--$53.30; +2.57; optionable (QCI): Biotechnology
http://biz.yahoo.com/p/i/imcl.html
STATUS: Made a solid move up in the handle of the 13-week cup base. In this market, it is nice to see a good-looking pattern, and this is one. Approaching the buy point as volume rose to 2.2 million (avg. 1.3 million). Shows strong money flow and good buying. Target: 63-65
BUY POINT: Breakout: 54.35 on minimum breakout volume of 2 million. Stop: 51. 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
Indexes: We are not looking at playing the OEX or DJX indexes for plays right away for the coming week. The OEX has sold to its previous low and can either bounce or fall further here; we aren't going to guess here. The DJX is a couple of points from possible support at 94.
QQQ (Nasdaq 100--$33.70; -0.20; optionable (QQQ):
STATUS: The index has not stopped falling for 8 days, generally; at least a look at the chart shows a slide, though the moves from day to day have been short. The index Friday showed a doji near the low of 33.35, but after the "run" down, the QQQ may be ready for a bounce. On that move our target is 35.50-36. The April low is 33.60.
BUY POINT: Aggressive: 33.80 on continued rising volume (up to 95.5 million; avg. 59 million). Stop: 31.50
POSITION: October $27 calls to buy (QAV JA).
SOX (Phili Semi--$513.91; +2.36; optionable):
STATUS: Showed a doji after Thursday's selling, so we are looking for the upside play if the index can rally back up from here. The chips look like they may try a bottom here, and if so, a bounce is possible. On that move, we will look at a target near the intraday high of 529.56 or Wednesday's closing price/Thursday's opening price at 534.56. We are keeping the upside target close for now.
BUY POINT: 515 on a move up in a market bounce.
POSITION: October $510 calls to buy (SXX IB).
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
ACS: Still holding at the 50 day MVA as volume was just lower (still strongly above average). Trying to form an ascending wedge if it can move up and over the short term moving averages soon (82).
ESRX: Tapped the 200 day MVA on the low of 46.85 and bounced back. Volume was up sharply and strongly above average on the selling and rebound.
UP & COMERS PORTFOLIOS:
LNCR, BJ, LOW, HI, THQI, BBBY, IGT, CHS, KG
THQI: Showing a tight doji on continued low volume Friday; the stock will try to move back up in a ranging pattern, to its recent peak near 53.
BBBY: Finally broke 28 and then took out its 200 day MVA at 27 on strong selling. If it does not recover back over that moving average quickly, we will drop the stock.
LOW: This one sold down to its 200 day MVA after a big gap down on the open; it bounced, but like other retail stocks, it will not likely recover quickly.
BJ: Another retailer that in this case continued the sell-off; the stock closed just under the 200 day MVA. It bounced from a low of 44.73, but if it cannot make a strong recovery soon we will drop it.
CHS: Gapped lower from Thursday's doji on the open, and took out the 50 day MVA on the way to a low of 32.68. It did bounce, and closed back over the support level. Volume was strong.
KG: Drug stocks are faring better; after selling off for 2 days, KG is holding at the 40 level as volume dropped off well below average. Still isn't a pattern to rave about at this point, because it is below the 50 day MVA (42).
IGT (Intl Gaming--$52.80; -1.35; optionable (IGT): Leisure
http://biz.yahoo.com/p/i/igt.html
STATUS: We noted the stock Thursday night as it squeezed between its 10 day and 50 day MVAs, and the pressure was relieved Friday on a break of the lower support at the 10 and 18 day MVAs, and the 200 day MVA (52.85). Volume was rising on the move at 1.1 million (avg. 1.16 million), and we are looking for the stock to keep dropping on further selling. Target on that move is the August lows at 46. IGT, on this break of the 200 day MVA, may move up to test that breach. Aggressive positions can be taken on a move down from there, but watch 52 for potential support.
BUY POINT: 51.95 (just below support at 52) on above average volume. Stop: 53.60
POSITION: October $60 puts to buy (IGT VL).
http://www.investmenthouse.com/cd/igt.html
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
BUD: Made a strong move today; volume was higher. If BUD can break over 45.50, it will have cleared out the overhead supply(flat base) that is helping to hold it back at present. The stock is back over the down trendline (connecting March, April, July and August highs).
JNJ: Dropped back on lower volume, showing a tight doji up from a test of the 18 day MVA (54.90).
BRCM: May be ready for a roll back up in its range as it consolidates on decreasing volume at support (30). It is one of the semiconductors we really have an eye on this week as it can easily give $5 and more in a move to the upside.
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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