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TEAM TRADES

Getting sucked in.

PLCM may be in a long base, but it has been showing signs of wanting to make a big break higher. It cleared the 200 day MVA Friday on massive volume, and we were looking to pick it up when it cleared some further resistance. As it turned out today, we should have waited until it cleared the May high at 29.88 as opposed to the September intraday high at 28.

PLCM was off and running again today, gapping higher, and then making a quick run up to the buy point (28.13). Volume was really high on the open with lots of buy orders. We liked what we were seeing and figured we were going to get another two or three days of upside on the stock. So, we put in a limit order for the stock at 28.25. It took a few minutes but was done. The stock was in high gear, racing up to 30 in the first half hour. Then it ran into 30, and turned right back down, selling to 28.50 over the next hour. That looked as if it was going to hold. After a half hour it sold sharply to the open price. It rallied back but then could not hold. The rest of the day was quite frustrating; the market rallied, PLCM did not. It closed the session right at 26.50, flirting with our sell point. There was no bad news; indeed, PLCM announced its first shipment of voice over IP telephones. Volume was again huge. We will give it a chance to regain itself up to 28 or even 30, but we are disappointed in this move to say the least.

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: CTEC continued its breakout again Monday as volume surged back up!
VGR, covered back on 9-10, gapped higher and above resistance on excellent volume. It pulled off the high of 41.65, but look for a hold at the 18 day MVA (where the stock closed) for a move back over the high as the stock rallies. We like DP and MCO (previously covered stocks) as well. We are watching the indexes as they moved up on lower volume; they can move higher if the market rallies further, or, they can pull back if volume keeps dropping.

Stocks/Indexes from the weekend report:
PSSI: Continued higher on rising, strong volume. The stock pulled off back after breaking past the previous high, however.
MOVI: Holding with a doji after trying to move higher; lower volume held the stock back.
FIMG: Gapped higher with a doji on rising volume. Look for a pullback to the 12.70-12.80 range.
ITRI: Tried to move higher, but closed with just a loss of a 4 cents. Volume remained high but decreased slightly; the stock is holding at the 20 support level for now.
IMCL: Bounced from the 10 day MVA but volume was lower, holding the stock back.
QQQ: Gapped higher and showed a doji as volume dropped back. Our target is the 33 range; if volume continues to pull back, look for support at or above the intraday low of 28.59. Tapped some resistance on the high (at 30).

Previous plays:
DP: Broke resistance on rising volume as it tests the breakout.
MCO: Made a good move up on strong volume with the stock breaking over the 50 day MVA. Formerly in an ascending wedge and perhaps here forming a larger one.
ROST: Holding above the 50 day MVA, above which it moved today. Volume was lower but we will look for the stock to hold here; ROST has pulled off the September high of 31.
EASI: A previously covered defense stock that has had a good run over the last week; today's move was again higher as volume decreased; watch positions here for a pullback to the 47.20 range.
RMCI: Ran to a high of 28 (near our limit for buying on a breakout, 28.85), but pulled back on lower volume; it did close higher all the same.
BRCM: Mirrored the QQQ by gapping higher and showing a doji after tapping resistance on the high. Can hold support here for the move up to the 30 range.
DJX: Bounced nicely as volume decreased (still well above average and strong). We are watching such bounces to see what kind of strength (or lack of) is behind them.
BLL: Still holding the 18 day MVA, volume lower and showing a doji (off a high of 55.88).
GIS: Moved back over the 50 day MVA on lower volume (still well above average, however). We'd like to see the stock hold this support.
SMTC: Back over its 200 day MVA; volume was lower and we want to see a hold at the support.
SLNK: Continued to hold the 50 day MVA as expected, but volume was higher. We'll see if support remains firm.
CFFN: Two days below the 50 day MVA. Is likely to hold support at the 18.50 range, however (50 day MVA is at 18.95).

Best Plays:
1) PRHC: Getting ready to break out.
2) DAP: A nice move over resistance, on good volume, too.
3) VRSN: Moving on news of an acquisition, which may help it break resistance.

New:

HSIC (Henry Schein--$36.99; +0.29; optionable (HQE): Wholesale Medical Equip
http://biz.yahoo.com/p/h/hsic.html
STATUS: This stock is in a cup with handle base of 4 months. Currently HSIC is off the September (handle) high of 37.94 as it consolidates above the 10 day MVA (36.57) and as volume decreases nicely from very high levels (last week). On that super strong volume last Thursday, HSIC could not break above the resistance, so we will see if the stock can give it another try after showing these two dojis above support. Volume was down to 267,300 (avg. 333,000). The stock shows huge money flow, high relative strength, and super buying. Target: 44-46
BUY POINT: 38.07, on minimum breakout volume of 500,000 or higher. Stop: 35.66 (below the 18 day MVA, 36.16). A buy on the breakout up to 39.97
POSITION: Stock and/or November or January $30 calls to buy (HQE KF or AF). Low open interests thus far.

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

PRHC (Province Healthcare--$37.50; +1.80; optionable (PUH): Health Services
http://biz.yahoo.com/p/p/prhc.html
STATUS: In a cup with handle base of 9 months (prior high at 42.63). The stock has found support again at the 50 day MVA (currently at 35.65), firm ground since early June), and moved up from there Monday on strong volume (640,600; avg. 429,181). We are looking for a breakout over the handle (August) high of 39.10. Shows great money flow and relative strength that has moved out ahead of price, a bullish sign. Target: 45-47
BUY POINT: 39.23, on minimum breakout volume of 644,000. Stop: 36.09 (18 day MVA is at 36.59). A buy on the breakout up to 41.19.
POSITION: Stock and/or December $35 calls to buy (PUH LG).

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

Update:

DAP (Discount Auto Parts--$14.00; +0.61; no options): Retail
http://biz.yahoo.com/p/d/dap.html
STATUS: The stock was covered in August in it pennant, then DAP lost that pattern as it sold back below the 50 day MVA. After hanging up below that resistance last week, the stock dropped to 12.60 then bounced on rising volume. Monday DAP broke the 50 day (13.49) as volume shot above average (174,700; avg. 81,318). Now that the stock is back in the range of the pennant (now called a flat base), we are looking for a continued strong move and breakout. Shows outstanding money flow and buying. Aggressive positions can be taken on a move up from here on continued rising volume. Target: 18
BUY POINT: 15.38, on continued strong volume (minimum breakout volume is 110,000). Stop: 14.30. A buy on the breakout up to 16.15.
POSITION: Stock.

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

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: Upon confirmation of last week's reversal, we will be picking the best of the newest leading stocks for infusion into the portfolio.
New Leaders: ESRX, ACS, NVDA, DGX, FRX
Previous Leaders in which we are still interested: VRSN

ACS: Pulled back on lower volume to the 18 day MVA; look for a hold of support here for a bounce.
DGX: Bounced lightly as volume fell back.
NVDA: Still below the 200 day MVA but gapped higher on rising volume. We'd like to see a quick recovery here, but will have to see what the stock does with the 200 day MVA.

VRSN (Verisign--$39.86; +1.56; optionable (QVR): Internet Software & Services
http://biz.yahoo.com/p/v/vrsn.html
STATUS: Hit a low of 36.29 but bounced back to close with a doji at the top of its intraday range; the company after hours reported that it would buy Illuminet Holdings in a move to expand its services, and was trading higher after the regular close on the news. Volume was huge in regular trading, up to 23.3 million (avg. 7.4 million). The news may be what VRSN needs to break it over the 18 day MVA (41.14) in a lasting way (the stock was over the resistance last week but immediately fell back below it. The 50 day MVA is at 45.53 for a quick trade on a move up from here, though the stock is likely to gap higher in the morning. Look for a pullback in that case, to the 18 day MVA, for taking possible positions on a continued move up. Initial target: 45.53
BUY POINT: Aggressive: 41.25, on a move up from the 18 day MVA after the stock first breaks that support level, then moves back to test. Stop: 38.50
POSITION: Stock and/or December $35 calls to buy (QVR LG).

UP & COMERS PORTFOLIOS: THQI, KG. Upon confirmation of last week's reversal, we will be picking the best of the stronger, rising stocks for infusion into the portfolio. Needless to say, this bunch was pummeled by this market.

THQI: Holding above the 200 day MVA.
KG: Gapped higher but hit resistance at the 10 day MVA; volume was higher so the stock is likely to pull back from this doji.

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

MSFT: Rallied over 2 points on lower volume. Possible support at 50.
JNJ: Hit the 50 day MVA but turned back down as volume decreased. Above the 52 support level again.
AOL: Rallied to close just cents above its 10 day MVA. Volume was lower on the move. The 18 day MVA is just under 35.

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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