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Begin Part 2 of 2

THE PLAYS: For summaries of plays moved to a watchlist, see end of report.

Note for reading plays: A "prior high" refers to the high at the start of a base.

All prices are current as of the close of trading Friday.

Best Plays:
1) MKT: A doji in the handle pullback, and volume is nicely low.
2) BDAL: On the way to a breakout.
3) RHB: Looks ready to move back up in its handle.
4) MRX: Getting close to a move up in the handle.
5) LMT: We look for an 18 day MVA bounce soon.
6) DRMD: Breaking out and still a buy!
7) HCP: Ready, just needs volume.
8) GD: At support on lower volume in the pullback.
9) PER: Forming a handle.
10) PRX: Consolidating on much lower volume.

NEW PLAYS:

SCSC (Scansource--$53.30; -0.25; no options): Computers wholesale.
http://biz.yahoo.com/p/s/scsc.html
STATUS: Has rolled into somewhat of a double bottom with the middle and left side high both at 60. The bottoms were at 40, with SCSC making a move up this month, taking out its 50 day MVA (49.96) last Friday, and continuing up until showing a couple of dojis. Friday's doji was of the 'hanging man' variety, with volume picking up sharply to 82,900 (average 54,200). We could see more of a handle formation here, looking for a continued pullback on lower volume. On that move, we would look for a break over what would be the handle high, at 53.80. The center of the pattern would be the first resistance we would target, at 59.85.
BUY POINT: 53.92 on minimum volume of 82,000. May test 50 one more time first. Stop: 50.25 (just below 10 day MVA).
POSITION: Stock only.

MKT (Advanced Marketing--$17.60; -0.10; no options): Wholesale basic materials.
http://biz.yahoo.com/p/m/mkt.html
STATUS: Had been trending down from the late June high of 20.95, and after moving in an upward drifting consolidation for much of August, fell out of that pattern to a low of 12.75 (mid-September), making something of a double bottom (center 17.45) or lopsided cup. MKT broke over the center to hit 19.53 earlier this week, and is now moving into a nice, lower volume handle consolidation over the 10 day MVA (17.29). The stock closed the week with a loose doji over that level on decreased, below average volume of 49,800 (average 58,000). From here we are looking for the handle-type consolidation to continue, giving MKT a chance to digest the recent gains and set up a move. The handle high is 19.53. Target: 24.
BUY POINT: Aggressive: After consolidating over the 10 day, a move over 18.25 on above average volume. Stop: 17. Breakout: 19.65 on volume of 87,000. Stop: 18.50.
POSITION: Stock only.

MCSI (Mcsi Inc--$16.45; -0.39; optionable): Computers wholesale.
http://biz.yahoo.com/p/m/mcsi.html
STATUS: Deep in its base (September 2000 high at 35), forming a cup with handle since May (high 18.95). Made a solid move up in September, but has pulled into a pretty nice handle over its 10 day MVA (16.47). Friday it pulled back again on volume that continued to be very low at 88,400 (average 400,000). Looking for the breakout move. Target: 21.
BUY POINT: 17.27 on volume of 600,000. Stop: 16.25.
POSITION: Stock and/or January $15 calls to buy (QIP AC).

BDAL (Bruker Daltonics--$20.49; +2.16; no options): Scientific & Tech Instruments
http://biz.yahoo.com/p/b/bdal.html
STATUS: Making a breakout move from a 5-month cup with handle. Volume was up strongly and sharply to 2.3 million (avg. 108,318), pushing the stock up close to the buy point. Much of the pattern is below the 200 day MVA (above which BDAL broke last week on a strong gap up), but this is a nice move in a good pattern, and we like the sector as well. Huge money flow and strong buying. Target: 25
BUY POINT: 20.87 on continued strong volume (minimum breakout volume is 162,000). Stop: 19.20. A buy on breakout up to 21.91.
POSITION: Stock.

RHB (Rehabcare--$44.20; +0.45; optionable): Health Services
http://biz.yahoo.com/p/r/rhb.html
STATUS: Pulling back in the handle of a double bottom/cup pattern. RHB broke out over the middle hump of the pattern (41.19) late September and the current handle is a test of that breakout. The stock held support with a doji at the 10 day MVA Friday, and we like the steadily decreasing volume in the handle, which by week's end dropped to well below average at 50,100 (avg. 168,000). Looking for a breakout over the handle high of 46.20. RHB shows good money flow and buying. Target: 56
BUY POINT: 46.33 on minimum breakout volume of 252,000. Stop: 42.65
POSITION: Stock and/or November $40 calls to buy (RHB KH).

MRX (Medicis Pharmaceutical--$54.33; +0.08; optionable): Consumer Non-Durables
http://biz.yahoo.com/p/m/mrx.html
STATUS: MRX is in a year-long base (prior high near 75), and currently is testing the breakout from a double bottom it formed since mid-July. That test is functioning as a handle, then, to 5-month base within the larger base, and we like the gradually falling volume in the handle. By Friday that was down to 155,800 (avg. 220,136) as the stock showed a doji, slightly up from an intraday test of the 10 day MVA (53.29). Looking for a strong move up and breakout. MRX shows huge money flow and buying. Target: 69
BUY POINT: 57.60, on minimum breakout volume of 330,000. Stop: 53
POSITION: Stock and/or November $50 calls to buy (MRX KJ).

Back on:

LMT (Lockheed Martin--$45.60; -0.79; optionable): Aerospace/Defense
http://biz.yahoo.com/p/l/lmt.html
STATUS: Broke out for the second time since September, and has pulled back to test the 18 day MVA (on Friday's low of 44.80), the stock bouncing back up with a doji as volume fell back below average (2.2 million; avg. 2.1 million). LMT may re-test the 18 day, but we look for another bounce and run back up. We will look at taking positions on a strong move up from there, since it is from the MVA that the stock gained 8 points for the run to October's high just above 49. Good money flow and buying. Target: 53
BUY POINT: 46.30, on above average volume. Stop: 43.50
POSITION: Stock and/or December $40 calls to buy (LMT LH).

RCGI (Renal Care Group--$31.75; -0.35; optionable): Health Services
http://biz.yahoo.com/p/r/rcgi.html
STATUS: Consolidating just off the bottom of base of 6 weeks and above the 50 day MVA (31.17). The stock is in a kind of wedging formation (outside of the late September shot up to 33 that retraced immediately next day) that is holding support at an up trendline (connecting August, September and October lows). However, the trendline is below the 50 day MVA and we are looking for RCGI to hold above that and/or the short terms (31.50 range). It did that Friday, pulling back slightly with a doji as volume decreased to 740,300, still strongly above the average of 382,454). Looking for a strong move back up and breakout of this base. Strong money flow. Target: 41
BUY POINT: Aggressive: 32.60 (32.55 hit three times in the base) on rising volume. Stop: 30.18 (just below the up trendline).
POSITION: Stock and/or December $25 calls to buy (NUQ LE).

CONTINUED PLAYS:

Indexes: The SOX and OEX stopped at resistance levels Friday. The market still looks solid, but may rest here once again. We are going to wait on new positions until we get a strong break over the near term resistance. Watch for resistance at the points listed below for each index. See the 10-10 report for other details and positions.

SOX (Phili Semi--$473.78; -0.82; optionable):
STATUS: Just a small loss as the index held up just under the 50 day MVA (484.73). Watch that resistance on current upside positions.

OEX (S&P 100--$560.78; -2.61; optionable):
STATUS: Hit resistance Thursday (the 50 day MVA at 566.61) for a slight pullback Friday with the market. Volume was lower but still above average. Watch the 50 day for resistance for current upside positions.

BREAKOUTS:

DRMD (Duramed Pharmaceuticals--$22.26; +0.56; optionable): Generic Drugs
http://biz.yahoo.com/p/d/drmd.html
STATUS: In more or less of a lateral, low-volume consolidation for the past three months, making a break over what appears to be a 2-week handle Friday. Volume was much stronger after the below average volume consolidation (327,800 (avg. 325,000). Huge money flow, and relative strength is ready to break out. Initial target: 27
BUY POINT: Remains a buy on the breakout up to 23.19. From here: A buy over 22.26 on minimum breakout volume of 488,000. Stop: 20.70
POSITION: Stock and/or December $20 calls to buy (DUQ LD).

TESTING THE BREAKOUT:

HCP (Health Care Prop--$38.10; +0.15; no options): REIT - healthcare propertites.
http://biz.yahoo.com/p/h/hcp.html
STATUS: Testing the September breakout from a flat base, off the October high of 38.75. The stock is holding support above the 10 day MVA (37.81) but the last 2 days of the week was up on decreasing volume (down to 81,700 Friday; avg. 164,000). It is showing that it is ready to move up, however, after testing the 18 day MVA on the low of 37.45 a closing positive Friday. Continue to look for a breakout over 39 but on strong volume. Target: 45
BUY POINT: Aggressive: 38.25 on increased volume. Stop: 37. Breakout: 38.88 on minimum volume of 220,000. Stop: 37.
POSITION: Stock only.

CYTC (Cytyc--$27.34; -0.10; optionable): Scientific & Technical Instruments
http://biz.yahoo.com/p/c/cytc.html
STATUS: CYTC corrected back to the 200 day MVA in September then cleared resistance at the July high of 27.01 with a strong run up to the October high of 28.93.
It has been consolidating off that high in a couple of bounces from the 10 day MVA (26.54), hitting resistance just under 28. Looking for strong volume to roll in to break it to a new high. Shows huge money flown and buying, and we like the sector. Initial target: 32
BUY POINT: 28, on continued rising volume. Stop: 25.50 (just below the 18 day MVA).
POSITION: Stock and/or November $22.50 calls to buy (YQK KU).

GD (General Dynamics--$87.90; -0.10; optionable): Aerospace/Defense
http://biz.yahoo.com/p/g/gd.html
STATUS: At support in its pullback from the October breakout run to 96. Showing a tight doji, GD is sitting on the 18 day MVA (87.82) with volume falling back pretty sharply to 1.4 million (just above average). It didn't hold the 10 day MVA (89.17) as we noted Wednesday, but is holding good support above the August high, so we look for a move back up. Money flow still looks good. Target: 103
BUY POINT: Aggressive: 89.65 (hit 89.60 twice recently) on rising volume. Stop: 86
POSITION: Stock and/or November or January $80 calls to buy (GD KP or AP).

IMNX (Immunex--$22.52; -0.45; optionable); Drugs - Biotech.
http://biz.yahoo.com/p/i/imnx.html
STATUS: Pulling back from the Wednesday and Thursday breakout. Volume was down at the stock tested 22 on the intraday low Friday, then bounced back up to close with a doji. We look for a hold at 21.45 if not 22 for a regroup and subsequent move back up over Thursday's high of 23. Volume was 12.1 million (avg. 8.9 million). Target: 26
BUY POINT: 22.95 on volume of 9 million or stronger. Stop: 21.20
POSITION: Stock and/or December $17.50 calls to buy (IUU LW).

WEDGES, PENNANTS, and FLYING PLATEAUS (AND FLAGS): These are some of our favorite patterns as the moves can be explosive. In this market, however, we need to see the move on the breakout on strong volume.

Wedges:

UCOR (Urocor--$17.03; +0.03; no options): Health Services
http://biz.yahoo.com/p/u/ucor.html
STATUS: Trying to tighten up the ascending wedge as volume keeps to very low levels (and falling), down to 34,300 Friday; average is 123,000. Looking for the breakout over 17.98, pattern high. It is getting pretty deep in the pattern and does not look as if it is building energy, but we will give it some time. Target: 22
BUY POINT: 18, on minimum breakout volume of 131,000. Stop: 16.74, just below the 50 day MVA at 16.86.
POSITION: Stock.

RA (Reckson Assoc--$24.25; +0.09; optionable): REIT
http://biz.yahoo.com/p/r/ra.html
STATUS: Wild as the March wind, but it remains in the ascending wedge, popping just higher Friday but volume was much lower at 105,900 (avg. 390,000). Unless volume roars in, this one is likely to pull back to test the 24 range again (near the low of 23.96), if not the short term MVAs (10 day=23.89; 18 day=23.74). It will hold the pattern nicely at any of those pullback targets. Showing outstanding money flow and buying, we look for a breakout over upper resistance at the 25 range. Love that gigantic volume spike Tuesday. Target: 29
BUY POINT: 24.48 on minimum breakout volume of 526,000. Stop: 22.77, below the 200 day MVA at 23.12.
POSITION: Stock and/or December $20 calls to buy (RA LD; low open interests).

ENDO (Endocare--$17.00; -0.42; no options): Health Services
http://biz.yahoo.com/p/e/endo.html
STATUS: Bouncing between 14 and 18, ENDO is now trying to narrow its trading range on very low, below average volume (93,200; average 205,136). It is holding above its 10 day MVA (16.95) as it consolidates. The pattern formed as part of a 12-week base that is in the upper right side of a much bigger, 20-month base. Continue to look for the breakout. Target: 22
BUY POINT: 18.43 on minimum breakout volume of 277,000. Stop: 16 (just under the 50 day MVA).
POSITION: Stock.

BASING/TRADING RANGES:

ARXX (Aeroflex--$12.31; +0.28; optionable): Aerospace/Defense
http://biz.yahoo.com/p/a/arxx.html
Status: Very nice lateral consolidation on lower volume (774,400; average 105,000) immediately following a cup with handle breakout. The breakout was not on huge volume, so we need to see it kick in on the next move. It broke out and is now moving laterally toward the 10 day MVA (11.65, tapped at on the low). We expect it to blow higher again in the next session or two. Relative strength has already broken out, a powerful signal.
BUY POINT: 12.85 on volume of 1.5 million or more.
POSITION: Stock

CAH (Cardinal Health--$73.70; -0.16; optionable): Drugs Wholesale
http://biz.yahoo.com/p/c/cah.html
STATUS: Pulling back in the handle to a double bottom. The stock showed a tight doji Friday just above the 10 day MVA (73.51) on the slight loss, with volume creeping just up to above average at 1.63 million (avg. 1.4 million). We'd like to see a hold here, but the 18 day MVA at 73.04 would be just fine. Like how it held above the 200 day MVA on the right leg of the pattern. Breakout is over 74.15, high in the handle. Target: 90
BUY POINT: Breakout: 75.27 on minimum breakout volume of 2 million. Stop: 71.95 (just under the 50 day MVA).
POSITION: Stock and/or December $65 calls to buy (CAH LM).

BBOX (Black Box--$49.40; -1.75; optionable): Computer Hardware
http://biz.yahoo.com/p/b/bbox.html
STATUS: Broke from a little cup with handle Thursday that had formed at the bottom of a ranging pattern that started late December. BBOX pulled back Friday, even as volume shot higher to 1 million (avg. 627,409), but held at the 50 day MVA (48.16). We are looking for the stock to head up from here as it completes formation of the right leg of the large double bottom into which the ranging pattern has evolved. This is an aggressive play with lots of overhead supply. Looking for a move up from here; the 200 can pose resistance at 53.75. Target: 70 (at the July highs, middle hump in the pattern).
BUY POINT: Aggressive: 50.25 on continued strong volume. Stop: 46.73 (just under the 10 day MVA at 46.86)
POSITION: Both positions: Stock and/or December $45 calls to buy (QBX LI).

PER (Perot Systems--$16.42; -0.17; optionable): Software
http://biz.yahoo.com/p/p/per.html
STATUS: Now is pulling back in a handle to a 14-week cup base. Volume is falling rapidly below average (to 83,300; avg. 226,000 by Friday), even as the stock tapped support at 16 on the intraday low, and bounced back to close with a tight doji. It can consolidate further in the handle, but we anticipate the breakout over the handle high at 16.75. Target: 20
BUY POINT: 16.88 on minimum breakout volume of 339,000. Stop: 15.50. A buy on the breakout to 17.72.
POSITION: Stock and/or December $15 calls to buy (PER LC).

PRX (Pharmaceutical Resources--$36.11; -0.08; optionable): Generic Drugs
http://biz.yahoo.com/p/p/prx.html
STATUS: Tried to break out of the double bottom with handle on Wednesday, but pulled back completely and is now consolidating above support the last 2 days of the week. With volume dropping off well below average Thursday and Friday, the stock is looking ready to make a move back up. Despite Wednesday's high of 38.80 we are keeping our aggressive buy point over the earlier October high at 37.60. Looking for a breakout as PRX shows super money flow and buying. Target: 45
BUY POINT: Aggressive: 37.73 on rising volume. Stop: 34.75. Breakout: 40.12 on minimum breakout volume of 770,000. Stop: 34.75
POSITION: Stock and/or November $30 calls to buy (PRX KF).

Removed TERN, PDG, VZ, DME, GISX, RIT, ARXX and SBC and all are on a watchlist.
The following stocks have also been removed but are being watched for this week:
EPIQ: Giving signs of topping out and ready to form a handle in the cup base.
GNTA: Blew over resistance on a strong move on huge volume. Breakout, and it is looking for more, but watch 13 to 14 for final resistance.
BEC: A doji above support as volume rises. Buy point on a breakout is 45.19 on volume of 321,300. Stock and/or November $40 calls to buy (BEC KH).
MOGN: Possibly topping already after Thursday's strong breakout move, but it was a day of selling then recovery.
MMC: Held with a doji after bouncing up from the 200 day MVA (low was 100.67) on lower volume. Hitting resistance at 105.50 and is trying to form a wedge, putting our buy point at 105.63. A 5-point move thus far on this one, and it may be trying to consolidate for a move over the recent highs.
ARG: Still holding above support. It tried to sell off but bounced back up from 13 to close with only a small loss. Just didn't give us the move we were looking for as volume rose Wednesday and Thursday.
DORL: Still holding above support in the handle to the double bottom, but has shown less than stellar price/volume action this week. Our buy point on a breakout is 39.57 on volume of 666,000. Stock and/or November $35 calls to buy (QDL KG).
CARS: Not the action we wanted to see after breaking out Wednesday, selling back (though mildly) on low volume. The low volume suggests a quick test of the 18.50 breakout. It is at support and can bounce back up for a move over 19 for stock buys only.
PLCM: May form a handle to the cup; did not rally Thursday despite high volume, and Friday held support at 32 for a small move up on lower volume. Buy point is over Thursday's high of 34.50 on volume of 3 million or better.
SMTC: Will look at Monday to see where Friday's doji (on lower volume) will lead it. The stock is over a point above earlier October support.
ODP: Broke to a new high Thursday but pulled back on lower volume, but as with most stocks, it closed well off of its session low. Still above the breakout.
GNSS: Watching for a pullback to form a handle.
MSCC: Has been running up on overall decreasing volume and needs a pullback to form a possible handle.
TECD: Testing the breakout; we are watching for support at or just above 42.
WLP: Watching for a move back over the 18 day MVA as the stock tries to form an ascending wedge.

Good Investing!
Jon L. Johnson and your Technical Traders Report Team

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 in 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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