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us stock market, stock watch
Begin Part 2 of 4
Note: Two part 1 sent. The first was incorrectly sent. Please use the second part 1 sent. Thank you.
SUBSCRIBER QUESTIONS
Q: You had mentioned the ARMS index a few weeks ago, as having a good track record for predicting market bottoms, then I haven't seen your conclusion of what actually happened. Could you comment?
A: The Arms Index has a couple of ways to read the market, the primary being a close over 1.50 indicating a significant bottom in 4 to 20 days after the signal is flashed. The indicator is simply another means of viewing market fear and anxiety and finding a 'capitulation' bottom. What happened this time around was interrupted by the events on September 11. Even if the Arms Index flashed the signal, it could not predict what happened after that signal was given. What did happen was other sentiment indicators that we follow all flashed reversal levels, some at levels never recorded before (e.g., put/call ratio). Those indicators all lined up at reversal levels, then the market rallied and gave multiple follow throughs with the A/D ratio at 2+ to 1, 3+ to 1. In addition, stocks started breaking out, and they are continuing to form up patterns so others follow in the breakout footsteps. The Arms Index may have been telling us this was coming anyway without the attack, but we are not sure you can honestly say it predicted this bottom.
TEAM TRADES
RE: Another split report stock was looking ready to rumble to a new high. Stocks on the split report are great performers; they would not be there otherwise. This insurance stock had taken a plunge on the attack, and then rallied 30 points to make it back to its base. Then it moved sideways for two weeks right at the old high; that is what you like to see after a strong move from a solid stock at the previous high. Volume backed off considerably in the lateral move, throwing out a huge spike six sessions ago as it remained in the consolidation. As discussed in the seminars, that is a 'get ready' spike; we look for big volume spikes in consolidations where the stock does not move. Buyers are coming in to scoop up the stock as fast as sellers are selling it. They won't let it fall.
RE hit the buy point about 10 minutes into the session and we issued an alert. After the alert was issued, we entered an order, but it was missed as we were a bit late (getting that alert out first). It ran to 76.75, and then it started to come back. As we teach in the seminars, even intraday stocks come back to test the breakout, and RE came right back toward the breakout point of 75.62 (0.13 above the high). The stock came right back down to test 75.60. Just as on Monday, we anticipated this and had entered a limit order to buy above the breakout point. The stock settled slowly down to the breakout point, triggered the order, then moved higher. Three hours later it cleared the session high, and in the last hour it raced ahead. We love this method of buying in an improving market.
THE PLAYS:
Remember in this market that targets, although set at generally conservative levels, are 'loose' and we are watching for topping signs on moves that would point to our taking profits. We will continue to point out those topping signs as we see them, and let you know when we are contemplating taking profits.
Also, we are still working on announcement date for many stocks, but are keeping with our policy of bringing you split candidates that have been looking solid whether or not we are able to pinpoint a date. If we get a surprise announcement on any of those stocks while we are playing them, so much the better!
BONUS PLAYS:
SOX (Phili Semiconductor--$462.73; +11.00; optionable):
STATUS: Found support at 451 and bounced after some selling Monday. The index is ready to rally from here, with lower support at 451. Below that, there is potential support at the intraday low (443) and the 18 day MVA at the lowest (436). The 50 day MVA is at 482.63, but the index can hit resistance at 474.60, hit twice over the last 4 days. Chip stocks were rallying after hours, but we will have to see a rally in the sector in regular trading after INTC's earnings (down but met estimates). On a gap up, look for a test of the opening price or today's closing price as the point to take positions. Target from here: 50 day MVA at 482 range. Initial target for move over 50 day MVA: 509
BUY POINT: Aggressive: 463 in a chips rally. Watch 474-475 for resistance. Over the 50 day MVA: 483 in a rally.
POSITION: November $450 or $460 calls to buy (SXX KJ or KL). Over the 50 day: November $470 or $480 calls to buy (SXX KN or KP). Deltas unavailable.
DJX (1/100 Dj Indu--$93.84; +0.36; optionable):
STATUS: Stronger volume of 1.2 million (average levels) and a slight move up as the index continues to consolidate just off last Thursday's high of 94.32. We are looking for a move up and break of the 50 day MVA (95.34) in a rally. On the move up the index came closer to our aggressive buy point of 94.33 (just over Thursday's high), but that is still a point from the 50 day MVA, so aggressive traders can look at that play (we are upping the buy point a couple of cents). Otherwise, look for the move over the resistance. Target: 98
BUY POINT: Aggressive: 94.33 on strong and rising volume in a rally. Stop: 91. Over the 50 day MVA: 95.35 on 1.2M or higher volume.
POSITION: November $88 or $90 calls to buy (DJX KJ or KL). Deltas
unavailable.
OEX (S&P 100--$564.14; +3.71; optionable):
STATUS: A small gain as the index rose on higher volume at 1.2 million (avg. 1.26 million). It closed just under the 50 day MVA (566.28), resistance that held it back 4 days ago. The index has not reached our aggressive buy point, but at 565 it is almost right at the 50 day MVA, so we'll look for the break of that resistance for considering upside positions. Initial target: 574
BUY POINT: 567 (the intraday high of 566.83 is just above the 50 day) on rising volume in a rally.
POSITION: November $550 or $560 calls to buy (OEB KJ or KL). Deltas
unavailable.
SZA (Suiza Foods--$58.60; +0.19; optionable): Food & Beverage
http://biz.yahoo.com/p/s/sza.html
STATUS: Back at the 50 day MVA after the stock pulled off the September high (64.73) on overall steadily decreasing volume. SZA hit the moving average support Friday and tested it again the last 2 days, and Tuesday showed a tight doji as volume shot above average to 455,500 (avg. 392,000). We are looking for a run back up to the range of the September high for an initial target. SZA has made regular bounces from the 50 day since mid-May. Great buying, high money flow.
BUY POINT: Aggressive: 58.70 (the stock hit 58.70 three times since August). Over the 18 day MVA (60.11): 60.15, on continued rising volume. Stop: 58 (under the 50 day MVA).
POSITION: Stock and/or December $60 calls to buy (SZA LJ).
MO (Philip Morris--$50.69; +0.21; optionable): Tobacco
http://biz.yahoo.com/p/m/mo.html
STATUS: Earnings are out before the bell Wednesday. In a cup with handle pattern with the handle having found support for now at the 10 day MVA (50.34). The stock bounced from there slightly Tuesday as volume rose to 4.26 million (avg. 6 million). Looking for a breakout over the handle (October) high of 51.72 on strong volume. MO shows strong money flow. Target: 62
BUY POINT: 51.85 on volume of 9 million or better. Stop: 49.21 (just below the 18 day MVA, 49.71)
POSITION: Stock and/or December $47.50 calls to buy (MO LW).
PRE-ANNOUNCEMENT PLAYS FOR THIS WEEK: Looking at GD and WHR tomorrow, with SLM Thursday.
BEST PLAYS: Besides the plays set forth below as best plays, there are some other stocks that also look good. These include Pre-Announcements LLL, RE, XL, EDMC, JEC and NDN; Continuing Candidates THC and BJ; and Post-Splits KMP and JNC.
PRE-ANNOUNCEMENT BEST PLAYS
1) SLM - Handle-type consolidation going into the forecast
2) GD - Trying to get some momentum going toward the announcement
3) WHR - Holding its consolidation
4) KRON - Moving up in the handle
5) THQI - Nice pullback and looking good
6) FDC - Good handle forming right now
SLM (USA Education--$84.75; -0.88; optionable): Forecast to announce a split on 10-18-01 during the market hours in conjunction with earnings.
http://biz.yahoo.com/p/s/slm.html
BACKGROUND: Last announced a 7:2 split on 11-21-97 at a price of $132. The annual shareholder meeting 5-10-01 at which time additional shares were authorized.
STATUS: Has pulled into a nice consolidation over its short-term MVA's, bouncing up Monday from the 18 day (83.54) and today holding the 10 day (84.37) with a loose doji. SLM has trended up nicely over the past 18 months from the 30 level, and broke out from a double-bottom recently, testing that move in the current lateral move that looks like a handle. Volume has been rather mild in the pattern, which is just fine, today coming in at 551,400 (average 819,000). Going toward the forecast Thursday we are looking for a move up to the breakout, with the pattern high at 86.70. Solid stock that could easily split at this level. Target on a breakout: 100.
BUY POINT: New high: 86.82 on increased, above average volume. Stop: 82. Aggressive: Over 86 on above average volume. Stop: 82.
POSITION: Both buy points: Stock and/or January $80 calls to buy (SLM AP).
GD (General Dynamics--$91.10; +1.15; optionable): Forecast to announce a split on 10-17-01 before the open with earnings.
http://biz.yahoo.com/p/g/gd.html
BACKGROUND: Last announced a 2:1 split on 3-4-98 at a stock price of $89. The company has just enough authorized shares for a 3:2 split, but can certainly announce contingent on an increase in the number of authorized shares.
STATUS: Made a very solid move with sector strength after the attacks, and made a strong recent breakout, but dropped back rather hard last week. GD caught support at the 18 day MVA (88.36), bouncing up the last couple of sessions. A decent bounce, and today's move took it back over the late September highs, but volume has been substantially lower than what we saw with the selling (down today to 1.46 million; average 1.24 million). It also pulled back well off of the intraday high of 92.50 today, which could indicate that the stock might pull back a bit. However, we are looking at a possible announcement before the open Wednesday, so we will see if good news will propel it up. With an announcement, if there is a solid gap up, we may wait to see if the stock comes back to test today's closing level and then makes a move back up with strong volume. Recent high is 96.
BUY POINT: A move over 92 on increased volume. Stop: 88.
POSITION: Stock and/or January $90 calls to buy (GD AR).
WHR (Whirlpool--$62.92; +0.13; optionable): Consumer Durables: Appliances. Forecast to announce a split with earnings on 10-17-01. The company has been reluctant to release a time.
http://biz.yahoo.com/p/w/whr.html
BACKGROUND: Based upon our research it does not appear that WHR has ever split its stock. The annual shareholder meeting was on 4-17-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: WHR finally rebounded, making a solid run up from the 50 range the last couple of weeks going toward earnings. It gapped over the 50 day MVA (61.28) last week, and it has held up well since then in a short consolidation. Today it reached up to 64.47 on reduced volume (901,200; average 804,500), also tapping back toward the 50 day at its low of 61.90. We will see if it can continue the upward momentum with a solid move afte tomorrow, looking for a possible announcement. It set up pretty well with this consolidation, but after getting a little wilder today we will look for a break over the recent highs on a possible announcement. There is intermittent resistance up toward its recent high at 72. Current positions still look good so long as WHR holds the 50 day.
BUY POINT: 64.60 on increased volume. Stop: 61.
POSITION: Stock and/or December $60 calls to buy (WHR LL).
KRON (Kronos--$58.22; +1.02; no options): Business equipment. Forecast to announce a split on 10-24-01 after the market closes in conjunction with earnings.
http://biz.yahoo.com/p/k/kron.html
BACKGROUND: Last announced a 3 for 2 split on 2-8-99 at a stock price of $43. The annual shareholder meeting was on 2-8-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: KRON is in a 2-year cup pattern, pulling back on a small consolidation after a massive move up the right side. After the strong move this consolidation looks good, and it held the 10 day MVA (54.69) at its low before starting up again yesterday. It continued today, although volume dropped back to 198,300 (average 176,300). Looking for the breakout as we continue toward the announcement. Target: 70. For aggressive positions taken on the bounce, we will look carefully for weakness given the volume.
BUY POINT: Breakout: 61.12 on minimum volume of 225,000. Stop: 57.
POSITION: Stock only.
THQI (THQ Inc.--$52.02; -0.32; optionable): We are working on a date.
http://biz.yahoo.com/p/t/thqi.html
BACKGROUND: Last announced a 3:2 split on 10-26-99 in conjunction with earnings. The stock price was $44. Prior to that announced a 3:2 split on 7-23-98 in conjunction with earnings. The stock price was $33. The company has sufficient shares for a 2:1 split.
STATUS: THQI finally made the move we were looking for last week, breaking over its down trendline with a strong move. After that move the stock has taken a rest, but is holding up well in a handle to a small cup pattern, dipping back on lower volume before today's surge (up to 1.47 million; average 1.05 million) as the stock showed a loose doji after again testing 51 at its low. Behaving well, and right in the range of its August pennant pattern. We will watch intermittent resistance at 55 (high on this move and up trendline connecting August lows) and 57.50 as the stock makes its way back toward its high at 62.
BUY POINT: A move over 55 on increased volume. Stop: 51.50. Aggressive: Over 53.50 on increased volume. Stop: 49.50.
POSITION: Stock and/or December $50 calls to buy (QHI LJ).
FDC (First Data--$66.37; +1.17; optionable): Working on a forecast date.
http://biz.yahoo.com/p/f/fdc.html
BACKGROUND: Last split was a 2:1 on 11-18-96 at a stock price of $80. The annual shareholder meeting was on 1-11-01 at which time authorized shares were increased. The company has sufficient shares for a 2:1 split.
STATUS: FDC was languishing a bit after tanking back with the market, but last week made huge moves up on the heels of surprising earnings and an upgrade. It is back in the range of its May-June consolidation and August lows, and at the resistance has pulled back into a handle. After a few dojis the stock made a move back up in the pattern today, although volume was down at 1.66 million (average 1.95 million). We are still looking for the breakout move, watching for volume to pick up on the move. The high is up at 72.
BUY POINT: 67.28 on volume of 3 million. Stop: 63.
POSITION: Stock and/or February $65 calls to buy (FDC BM).
FORMER SPLITS BEST PLAYS: As the market finds itself, we are focusing on some of the stocks that have shown a propensity to split and which are looking solid.
As the market finds itself, we are focusing on some of the stocks that have shown a propensity to split and which are looking solid.
1) SCHL - Still in the handle
SCHL (Scholastic Corp--$47.30; -0.05; optionable): Publishing.
http://biz.yahoo.com/p/s/schl.html
STATUS: SCHL has just very strong on its recent run up, forming the right side of its cup base. The left side high is at 49, and the stock has pulled into a handle. It bounced up from its 10 day MVA (46.09) Monday, but volume was quite weak, and today it hit the buy point but could not hold the move, pulling back for a 'star' doji. Volume was just about what we were looking for (298,000; average 287,500), but off of this candlestick pattern we will look for SCHL to test back toward the 10 day and then try again at a breakout move. If it can get past 49 (the high from February), we will target 57.
BUY POINT: After a lower-volume test of the 10 day, a move to 48.36 on minimum volume of 420,000. Stop: 45.
POSITION: Stock and/or December $45 calls to buy (USC LI).
CONTINUING CANDIDATE BEST PLAYS:
1) TECD - Nice pullback after the move and looking ready for more upside
2) RMD - Holding up with a small ascending wedge
TECD (Tech Data--$43.00; -0.35; optionable): Computers wholesale. http://biz.yahoo.com/p/t/tecd.html
BACKGROUND: Last announced a 2:1 split in March 1994. The annual shareholder meeting was on 6-19-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: TECD made a nice breakout move last week as it continues to build the right side of its bigger base (prior highs at 55 from September 2000). After the big move it pulled back but has held its prior highs and 10 day MVA (42), today testing just below that level at 41.68 before climbing back up to close. Volume continued to be down, which is fine on a pullback off of a strong move (627,100; average 757,000). Looking for the stock to hold this level and make a strong move back up. It has set up nicely. On this move we are targeting the 50 level initially. The breakout high last week was 45.25.
BUY POINT: A move back over 44 on increased, above average volume. Stop: 41.
POSITION: Stock and/or December $40 calls to buy (TDQ LH).
RMD (Resmed--$54.02; -0.28; optionable): Health services.
http://biz.yahoo.com/p/r/rmd.html
BACKGROUND: Last announced a 2:1 split on 2-25-00 with a board meeting. The stock price was $68.
STATUS: RMD made a gap over resistance (the 50 day MVA at 52.47) last week, but although volume was not very big on that move, the stock has really held up well. In fact, it has pulled into a small ascending wedge, today showing a loose doji on very low volume (41,300; average 217,300). The stock is just over the June-July range of the bottom of the recent cup pattern, and we will see if it can make a solid move from here. Still somewhat of an aggressive momentum play, and we will keep careful stops in place on a move up from here. The August high on the cup breakout was 61.39.
BUY POINT: Aggressive: From here or after holding 53.50 on a low-volume pullback, 54.62 on volume of 275,000, with stock and/or January $50 calls to buy (RMD AJ). Stop: 52.
POST-SPLITS BEST PLAYS:
1) WFMI - Strong move and getting ready for more
2) JNJ - Nice pop up off the 50 day MVA on earnings
WFMI (Whole Foods--$33.50; +1.12; optionable): Grocery Stores. Split 2:1 June 5.
http://biz.yahoo.com/p/w/wfmi.html
STATUS: WFMI has recovered back over the 50 day MVA (32.05) from its doldrums suffered with the market pullback. It has moved on very low volume while holding that support, but today was able to make a move up with some solid volume behind it, up to 714,700 (average 701,500). Something of a reverse head and shoulders pattern, with the 'neckline' defined by the stock's high (from August) at 35.87, but we are looking at more aggressive positions on a continued strong move. On a solid move over the high (35.87) we will look at 41.50 as a target.
PLAY: Over 34 on continued strong volume, with stock and/or November $30 calls to buy (FMQ KF). Stops: 31.75.
JNJ (Johnson & Johnson--$56.77; +1.05; optionable): Drugs. Split 2:1 June 12.
http://biz.yahoo.com/p/j/jnj.html
STATUS: Took off today on a favorable reaction to earnings. The stock had tapped back to the 50 day MVA (54.45), but again held that level, and today jumped over last week's highs on big volume (up sharply to 14.1 million; average 8 million). The stock is back at its August-September highs in its recent range (the intraday high is 58),a nd we will see if the stock can continue to generate a move. Target: 64.
PLAY: From here: With continued strong volume, a move to 57.25, with stock and/or January $55 calls to buy (JNJ AK). Stop: 54. Breakout: 58.12 on continued strong volume, with stock and/or January $55 calls to buy (JNJ AK).
End Part 2 of 4
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us stock market
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