us stock market, stock watch

Begin Part 2 of 4

SUBSCRIBER QUESTIONS

Q: You need to state clearly "What it is we want them to do." Don't assume your readers know/understand that well enough to write a letter spelling it out to their representatives. Awaiting further advice....

A: Okay. I had my chops busted enough on this today. First, here is the U.S. Senate web site so you can look up your senator's email and telephone number:
http://www.ussenate.com/

Next, as to what they need to do, foremost is not follow Japan's method of stimulus, i.e., government spending programs that put money where the government felt it should go. That did not put money into the system for businesses to invest in new technology or start new ventures. It did not encourage individuals to spend. Both held onto their money, and the economy continued to implode. The current senate bill is mostly government spending, and history shows that the government is abysmal at putting money to work in the right places. Worse, much of the spending is subsidies, one of the least stimulative methods of spending. It pays you to be inefficient or not to work. That is the furthest thing from what we need. Moreover, what business stimulus there is is pork; it benefits very specific and very limited industries that represent the pet projects of many senators. What is important is to get investment in America going. Investment in ALL of America. What is that? Investment in what makes us the leader: new technologies, new ideas, new techniques. It is not just technology, but any business that has a better idea. Give businesses (ALL businesses, not just a few here and there as is the current senate bill) tax credits and accelerated depreciation to get them to buy new equipment and take business risks they would otherwise not take given the economy and demand for products.

It is not a big business issue; 80% of U.S. businesses are considered small business, i.e., less than 25 employees. Getting them to buy computers, phone systems, new vehicles, new manufacturing equipment, hiring workers (yes, there can be incentives for that) get companies making new items, and that also puts people to work. You have to heal the whole picture, not just 'prime the pump' by giving money to people regardless of whether the pay taxes or not or have jobs or not. That did not work with the previous rebates as 80% of that money went into the bank or under the matress (ala, Japan).

What we need to do is take action that CREATES JOBS. That means getting businesses to need more workers. That means getting businesses to buy equipment, the part of the economy that has been in recession for over a year even as the consumer kept on spending. Buying equipment leads to eliminating inventory and starting up production again. That creates jobs. That gets consumers in good moods again and gets them buying more and more. As we said before, you won't get consumers buying until they are comfortable about the futrure, and that means job security. That is the LAST part of the equation. It always lags the recovery. Extending unemployment benefits is almost perverse to what needs to be done: it does not create jobs; it could be argued as simply promoting not working.

Please feel free to use any of this in writing your senators.

ABOUT THE REPORT: In response to member requests, we have changed the appearance of the report to make it easier to keep track of your favorite plays! First, we are adding new section of "Market Favorites," which are widely-traded stocks that are popular with our members. That will debut this weekend. Second, we will continue to feature our daily "Bonus Plays" and "Best Plays," but we are presenting the remaining plays in a different fashion. They are still arranged according to position in the split cycle (Pre-Announcement, Pre-Split, Continuing Candidate and Post-Split), and we will continue to prepare full descriptions of those stocks making significant moves or that are in solid patterns and ready to make good moves. Other stocks, such as those that have momentarily fallen out of a pattern or which need to pull back after a move, we will include on a watch list (again, broken down by section), providing a brief description of what occurred that session and what to anticipate. When they 'get right,' we will provide a full write up.

THE PLAYS: ITG announced its split today!

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. The stops are initial stops that we place within 7% of the buy point, typically below support. In this market we are moving up the stops to protect profits as we realize gains.

BONUS PLAYS: Solid moves by bonus plays, with a big move by SLOT.

DORL (Doral Financial--$34.80; +1.16; optionable): Real Estate
http://biz.yahoo.com/p/d/dorl.html
STATUS: Covered Call play. DORL is in a rolling pattern that ranges between, roughly, 39 at the highs and the 200 day MVA (currently just under 32). The stock looks ready, after today's solid move up on strong volume (722,000; avg. 454,000), to make the run back up to the 39 range. Price just broke the 50 day MVA (34.76) on the move. We are looking at buying stock from here to ride up to 39, at which point we can sell December calls on the purchase, when (and if) the stock tops out. On the play we are looking at a return of about 16%.
BUY POINT: 34.85 on continued rising volume. Stop: 32.41 (7%).
POSITION: Stock at buy point. Calls to sell on topping: December $30 calls to sell (QDL LF).

ANAD (Anadigics--$20.10; +2.35; optionable): Semiconductor
http://biz.yahoo.com/p/a/anad.html
STATUS: Breaking out of a cup with handle pattern (part of a huge base with highs over 110) on big volume of 1.97 million (avg. 609,000). The stock vaulted from support at 18 and ran up to resistance at 20.10, the most recent high, and is ready to break out. Strong money flow and high relative strength. Target: 24.16
BUY POINT: 20.13 on continued strong volume. Stop: 18.72 (7%)
POSITION: Stock and/or December or January $20 calls to buy (DQA LD or AD). Deltas unavailable.

SCUR (Secure Computing--$18.60; +0.51; optionable): Software
http://biz.yahoo.com/p/s/scur.html
STATUS: Making a move up from the base of a handle to a 6-month cup base. Volume shot above average to 332,900 Tuesday, pushing SCUR off of support at 18. Looking for the breakout, and we like the excellent money flow and buying. The handle formed after a stellar run up from the October low at 8. Target: 23
BUY POINT: Breakout: 19.38 on volume of 499,000 or better. Stop: 18.02 (7%)
POSITION: Stock and/or December or January $17.50 calls to buy (UQU LW or AW).

AVNT (Avant Corp--$11.40; +1.15; optionable): Software
http://biz.yahoo.com/p/a/avnt.html
STATUS: In an ascending wedge and moving up from support (10 day MVA, 10.50) on strong and rising volume of 759,300 (avg. 457,454). The stock formed this pattern after breaking out of another wedge at the end of October, and we look for similar action here. The stock remains a buy on breakout up to 12.89, and the 200 day MVA is at 13.45. Strong money flow and buying. Target: 15
BUY POINT: 12.28 on volume of 618,000 or higher. Stop: 11.42 (7%)
POSITION: Stock and/or January calls to buy (NVQ AB).

PRE-ANNOUNCEMENT PLAYS FOR THIS WEEK: PEP is forecast for Thursday.

BEST PLAYS: Besides the plays set forth below as best plays, there are some other stocks that also look good. These include Pre-Announcement FDC; Pre-Split KRON; Continuing Candidates RMD and CBH; and Post-Split JNC.

PRE-ANNOUNCEMENT BEST PLAYS
1) ITG - Announced a split today!
2) FLO - Ready to spring going into the forecast
3) MI - Still looks good
4) PEP - Forecast for Thursday
5) SONC - Still a put

ITG (Investment Tech Group--$64.83; -0.01; optionable): Announced a 3:2 stock split today! It will be effective December 10.
http://biz.yahoo.com/p/i/itg.html
STATUS: Got the announcement, and ITG remains in a solid pattern. Since breaking from a cup in February, ITG had been ranging from 45 to 58, but managed to breakout in October. It made a steady move up its 10 day MVA (currently 64.19), and is now in a flying plateau. The lateral consolidation has been steady over the last couple of weeks, using the 10 day as support. On the news today the stock hit up to 65.35, not quite to the buy point, closing with a doji as volume dipped to 181,000 (average 234,500). Still looks poised to move. High in the pattern is 65.80. Target: 75.
BUY POINT: 65.92 on volume of 310,000. Stop: 62.
POSITION: Stock and/or January $60 calls to buy (ITG AO).

FLO (Flowers Foods--$41.40; -0.32: optionable): Food & beverage. Forecast to announce a split on 11-16-01 in conjunction with a board meeting. The company will not confirm this date, but based upon our research this is the date for the next board meeting.
http://biz.yahoo.com/p/f/flo.html
BACKGROUND: FLO last split in May 1997 at a price of $25. The annual shareholder meeting was on 5-31-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Continues to hold support and looks poised to move. Going toward the forecast FLO pulled back from its breakout run that hit a high of 43.44, testing the breakout and holding its 10 day MVA (41.33). Today FLO tested below that support, but pulled back up to show a second consecutive loose doji as volume spiked up to 82,300 (average 70,100). We like the volume spike, and are looking for FLO to take a bounce and challenge its high. Target: 50.
BUY POINT: A move back over 42.25 on average or better volume. Stop: 40. On a hold of support here we can also look at positions before the close Wednesday in anticipation of the meeting.
POSITION: Stock and/or January $40 calls to buy (FLO AH).

MI (Marshall & Ilsley--$60.57; +0.59; optionable): Banking: Regional. We are researching a forecast date.
http://biz.yahoo.com/p/m/mi.html
BACKGROUND: Based upon our research it does not appear that MI has ever split its stock. The annual shareholder meeting was on 4-24-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Still testing the breakout. MI made a nice breakout move last week from a large 'flying W' with handle pattern, but after hitting a high of 61.45 it pulled back to test the breakout. We saw a 'hammer' doji pattern Monday, which can foreshadow a solid move, but today it made a modest rise on volume that remained below average and steady at 206,000 (average 224,400). Holding support on this test is key, and we are still looking for a strong move up and over the breakout high. Still targeting 70.
BUY POINT: 61.57 on above average volume. Stop: 57.25 (50 day MVA at 57.58).
POSITION: Stock and/or December $55 calls to buy (MI LK).

PEP (Pepsico--$49.44; +0.42; optionable): Forecast to announce a split on 11-15-01 in conjunction with a board meeting. The company will not confirm this date, but based upon our research this is the date for the meeting.
http://biz.yahoo.com/p/p/pep.html
BACKGROUND: Last announced a 2:1 split in April 1996 at a stock price of $60. The annual shareholder meeting was on 5-2-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Still trending up on low volume. PEP has been moving in a ragged cup dating back to late December, and has had a couple of handle breakout attempts that have stalled at the stock's high at 50 (in September and October). After those moves the stock pulled back to its 50 day MVA (currently 48.12), and tracked that level along its daily lows but as it has gradually climbed it is now holding its 18 day MVA (48.75). It has finally managed to crack over what was resistance at 49, but volume has remained quite low on the move up, and on the move up today volume continued to be below average at 3.84 million (average 5.45 million). Looking at a forecast of Thursday, and for positions going into the board meeting we would like to see some volume. PEP is in the same range as Pepsi Bottling (PBG), which announced with a board meeting this month (and is now on the report as a pre-split). Target: 60.
BUY POINT: Breakout: 50.12 on volume of 8.5 million. Stop: 47.50. Aggressive: A move up with above average volume. Stop: 47.50.
POSITION: Stock and/or January $45 calls to buy (PEP AI).

SONC (Sonic--$30.69; -0.57; optionable): Restaurants. We are working on a date.
http://biz.yahoo.com/p/s/sonc.html
BACKGROUND: Last announced a 3:2 split on 11-14-00 in conjunction with a board meeting. The stock price was $36.69. The annual shareholder meeting was on 1-30-01 at which time no additional shares were authorized. The company has sufficient shares for a 3:2 split.
STATUS: SONC earned the wrath of investors last week when it took a solid Monday breakout and immediately released negative news. The breakout was then history as the stock dumped back on news that it was expecting lower profits in the first quarter. In any event, after that gap down and intraday low of 28.45, the stock has tried to move on its 50 day MVA (31.55), and after gapping over that level but dropping below it each session, Tuesday saw SONC gap down and continue to fall, selling on the volume spike we have been looking for (527,200; average 236,500). It has hit our buy point for downside positions, but it is still a buy on this move, as we are targeting 200 day MVA at 28, although we are watching potential support at 29.
BUY POINT: 30.25 on continued strong volume.
POSITION: December $35 puts to buy (ZXQ SG).

PRE-SPLITS BEST PLAYS: Remember, we try to grab these as they break out of good patterns or as they start a run right before the split. Not looking for home runs, but looking for those $3 to $4 moves running into the split, watching for topping signs and potential resistance. Not huge money, but it can be very steady. We set our initial stops at the 7-8% range below the purchase price (or just below obvious support), and move them up on a move to preserve our profits.
1) PSC - Could be ready for another run
2) FULL - Broke out
3) BRO - Looks like an 18 day MVA bounce coming

PSC (Philadelphia Suburban--$29.47; +0.22; no options): Water utility. Splits 5:4 effective 12-3-01.
http://biz.yahoo.com/p/p/psc.html
STATUS: Could be ready for another move. Broke from its cup-with-handle (also in the form of an ascending wedge) last week, but quickly moved into a bit of a tight lateral move. After a couple of dojis, today PSC tapped its 10 day MVA (28.88) at its low before moving back up, hitting just above the prior breakout high before pulling back slightly to close. Volume was way up at 180,500 (average 80,200), so PSC could be ready to make another serious surge. As it makes its move we are watching the recent (mid-October) intraday spike at 30.80, but if it can make it past that level, we are targeting 34. If it cannot, we will look to exit there, and see if it catches support on a quick move down, offering another chance at a pre-split run.
PLAY: A buy point of 29.75 on continued strong volume, stock only. Stop: 28.50 (18 day MVA at 18.56; 50 day MVA at 27.76).

FULL (H.B. Fuller--$56.83; +1.50; optionable): Chemicals. Splits 2:1 effective 11-19-01.
http://biz.yahoo.com/p/f/full.html
STATUS: Make a breakout! FULL has been inching up along its 10 day MVA (54.49), with recent moves coming on rather weak volume. It looked like it would need to come back for a bit of a test of support and consolidation, but instead it got an infusion of volume and made the good move (volume up to 77,400; average 58,500). We could still get a pullback, and as pre-splits are typically volatile anyway, we are carefully protecting profits with stops. Still a buy on the move up to 58. Target: 62.
PLAY: Aggressive: A buy up to 58, with stock and/or December $55 calls to buy (FUQ LK). Stop: 54.

BRO (Brown&Brown--$58.08; +0.28; no options): Insurance Brokers. Splits 2:1 effective 11-21-01.
http://biz.yahoo.com/p/b/bro.html
STATUS: Continues to hold support. BRO has been on a solid run, and is now in a small rolling consolidation. After the market reopen, BRO made a good move to make a new high, then consolidating a bit the first half of October before taking off again, making a new high on an intraday spike at 62.20 before pulling back to the 18 day MVA (currently 57.84). It is rolling a bit now, having again hit back up to the 60 range but is now back in the neighborhood of some recent lows and its 18 day, Tuesday showing its third consecutive doji at that support. Volume remained low at 120,900 (average 141,000). Volume had dipped back on the move down, which is good action, and off of this higher-volume doji we will see if it can put together another move. Initial target 66, but we will watch for topping signs as pre-splits can be volatile.
PLAY: From here: A move over 58.75 (10 day MVA at 58.33) on increased volume. Stop: 56. Breakout of range: 60.72 on volume of 180,000. Stop: 57.50. Stock only.

CONTINUING CANDIDATE BEST PLAYS:
1) STJ - Looking for a 50 day MVA bounce
2) BJ - Still a put

STJ (Saint Jude Medical--$70.16; -0.14; optionable): Health Services.
http://biz.yahoo.com/p/s/stj.html
BACKGROUND: STJ last split its stock 3:2 in late 1995 at a price of approximately $60. The company has sufficient shares for a 2:1 split.
STATUS: Holding support at the 50 day MVA and could bounce. STJ bounced from the 50 day (currently 69.86) in late October, bouncing up to 69.83 last week before gradually pulling back. There is additional support here from the center of STJ's former double bottom pattern, and with the loose doji today on increased volume (672,600; average 620,000) we are looking for a solid bounce. The all-time high, from October, is 75.37.
BUY POINT: Aggressive: A bounce, with a buy point of 71.50 (over the 18 day MVA, 71.36), with volume of 700,000 or better. Stop: 69.
POSITION: Stock and/or January $65 calls to buy (STJ AM).

BJ (BJ Wholesale--$48.30; +0.44; optionable): Retail - Discount
http://biz.yahoo.com/p/b/bj.html
BACKGROUND: Last announced a 2:1 split on 2-4-99 at a stock price of $44. The annual shareholder meeting was on 5-24-01 at which time no additional shares were authorized. The company has sufficient shares for 2:1 split.
STATUS: Still looking like a put. BJ dropped back abruptly last week (out of the ranging handle to a cup) as the company announced weak sales numbers. It momentarily held the 200 day MVA (48.65), but dropped through that support Monday, hitting the put buy point as volume remained above average. Tuesday BJ tried to recover, but after reaching 49.18 the stock dipped back to close under the 200 day, with volume dropping lower on the attempt (728,800; average 667,000). We could get another try to run back over the 200 day, but on a failure of that move we will continue to ride existing positions and look at new plays. Still targeting 42, but we will watch for bottoming signs as it drops.
BUY POINT: After another failed bounce over the 200 day, a buy point of 47.50 on volume of 1 million or better.
POSITION: December $55 puts to buy (BJ XK).

End Part 2 of 4

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