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stock watch, stock trading
Begin Part 2 of 3
TEAM TRADES
Today we were anticipating having to issue a few stop alert advisories (we send out alerts when stocks hit 7% below the buy point, moving them up as the stock moves higher so investors can determine if they need to sell or can continue to hold), but as we watched the action unfold today, stocks were holding onto their gains. I was driving our traders crazy with questions about stop alerts. But, it is a bit indicative of the market of late; stocks being stingy and not selling back. To the contrary, we saw many stocks hit solid buy points on the rally up, and most held onto those gains.
One that I really wanted today was QLGC. Of course, I had to run to a meeting and was not in when it hit the buy point and our folks sent out the alert. I checked my Palm, but when in a meeting it is not always convenient to stop and check any messages. Well, when I was able to check, the market was in the last half hour of trading and QLGC had made a strong move and was above the pivot point riding great volume though it was down off of its high. I was tempted to put in an order right then and started looking at the option choices we had for January. On a whim I looked at April $40 calls (The stock was at 49) and they were asking just under $15 and the spread was a reasonable 30 to 40 cents. I could buy three more months for about $1 more per month per option. Not a bad deal. Discussing the market with the traders, it was brought to my attention that they were going to issue an alert that the Nasdaq and SOX had touched the 200 day MVA and had made a small double top and had started to tank pretty fast. I decided to see if QLGC and a handful of other stocks that had moved well could make the move back up along with the Nasdaq. I had a feeling, however, the Nasdaq was not going to make it over the 200 day MVA, and it was a day of churning.
QLGC started back up. The options moved to $15 on the ask. Volume was good. It was a great move out of a great pattern. I was ready to plow into the full position, but that close on what was going to be a doji on higher volume below the 200 day MVA was nagging. Time to an option buyer is the key. If the Nasdaq could not break above the 200 day MVA in a session or two, the options could lose a bit of value based on time and some falling volatility after such a great move (not much, but some). That is why I really started to think about April calls and stock (no time limit there). I also started thinking about scaling back the buy; why plow into the full position when there was some doubt about the doji below resistance. So I shortened up on the bat so to speak. I put in a limit order for 5 contracts, roughly a third to a quarter of the total position I was envisioning on this position. I could have picked them up for 14.90, but the stock was moving up a bit and put in a limit at the ask. The fill was made I was told by the broker, but have not received a confirmation as usual. Hmmm. Anyway, the point was I liked what I saw in the stock, but had some nagging reservations about the market action. So, I looked for more time and I took a smaller position. If it performs again, moving up on this breakout, I will add to my position; I like adding to winners that are working for me.
THE PLAYS:
Targets and Stops: 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:
GNSS (Genesis Microchip--$52.43; +3.93; optionable): Semiconductor.
http://biz.yahoo.com/p/g/gnss.html
STATUS: Broke out to a new high today from a small double bottom. GNSS has broken out of a cup in October, and after hitting a high of 52.24 in early November it dipped back to test through its short-term MVA's (18 day at 46.54 currently). It fought back from the second bottom last week and today took off on good volume (3.16 million; average 1.98 million), hitting a new high. Still a buy up to 54.85, and a target of 65.
BUY POINT: A buy up to 54.85 on continued strong volume. Stop: 50-51.
POSITION: Stock and/or March $45 calls to buy (QFE CI).
TERN (Terayon Communication--$13.11; -0.17; optionable): Telecommunications.
http://biz.yahoo.com/p/t/tern.html
STATUS: Moving in a nice flying plateau. TERN broke out from a cup with handle in October and since has made two solid moves from its 18 day MVA. The last move blasted up from 10 to hit 14 (intraday spike last week hit 14.34), and it has for the last week and a half gradually pulled back to the 10 day MVA (12.77) on light volume. Today the stock tapped the 10 day, showing another 'star' doji on volume of 1.22 million (average 1.82 million). A nice pattern, especially after a strong breakout move as we saw earlier in the month. We are looking for a strong breakout. Target: 17.50.
BUY POINT: 14.12 on volume of 2.45 million. Stop: 13.13 (7%).
POSITION: Stock and/or January $12.50 calls to buy (TUN AP).
PRE-ANNOUNCEMENT PLAYS FOR THIS WEEK:
BEST PLAYS: Besides the plays set forth below as best plays, there are some other stocks that also look good. These include Pre-Announcements DHR, TJX and NDN; Past-Split LUV; Pre-Split KIM; and Post-Split PDLI.
PRE-ANNOUNCEMENT BEST PLAYS
1) SRCL - Broke to a new high
2) BBY - Looking for more on the breakout
SRCL (Stericycle--$57.92; +1.80; optionable): Waste management. Forecast to announce a split on 2-19-02 after the market closes in conjunction with earnings.
http://biz.yahoo.com/p/s/srcl.html
BACKGROUND: Based upon our research it does not appear that SRCL has ever split its stock. The annual shareholder meeting was on 5-15-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Good bounce and breakout. We were looking for SRCL to bounce up from the 10 day MVA (55), and it made the move Monday, and continued up today. SRCL took out its prior high (from last week) at 57.85, moving on solid volume of 379,900 (average 259,400). Looking good after a strong recovery from its 50 day MVA (then 47.50, now 49.71), and we are looking for a continued run with a target of 65.
BUY POINT: 58.62 on increased volume. Stop: 55.
POSITION: Stock and/or February $55 calls to buy (URL BK).
BBY (Best Buy--$71.08; +0.26; optionable): Forecast to announce a split on 12-18-01 in conjunction with earnings. The company has not confirmed a time for the release at this time.
http://biz.yahoo.com/p/b/bby.html
BACKGROUND: Last announced a 2:1 split on 2-22-99 with a board meeting. The stock price was $95. Prior to that announced a 2:1 split on 4-24-98 with a board meeting. The stock price was $71. The annual shareholder meeting was 6-26-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Rested today. BBY made a weak initial move from its small, ascending wedge handle Friday, but followed with a strong move up Monday that took out the left-side high of its cup (69.90, from July). Today BBY reached up to 71.60 before coming back a slightly, showing a loose doji as volume dipped back (4.09 million; average 3.59 million). We will see if we get renewed strength after this rest and a continued move up, but if we get some market softness we will see if BBY tests the breakout on low volume, holding its ground for a move back up when we get some more strength, or perhaps forming a bit better handle this time. In its 1998 split range, and we are targeting 80 on a solid move.
BUY POINT: From here or after a low-volume pullback that holds 69-70: 71.72 on increased volume. Stop: 67 (10 day MVA at 67.20).
POSITION: Stock and/or January $65 calls to buy (BBY AM).
PAST SPLITS BEST PLAYS: These are former splitters that look ready again.
FIC (Fair Isaac & Co--$57.80; +0.35; optionable): Business services.
http://biz.yahoo.com/p/f/fic.html
STATUS: FIC tried to breakout of its cup with handle Monday, but did not have the volume (although it was substantially higher than what we have seen in the handle) and it pulled back from 59.98. Today we saw another loose doji over the recent support of the 10 day MVA (56.88), with volume again dropping back to recent levels at 102,500 (average 179,000). This is a nice-looking handle consolidation that is holding support, and we are looking for a surge in volume to carry a breakout. FIC is showing excellent money flow and buying. Target: 70.
BUY POINT: 58.88 on volume of 270,000. Stop: 55.
POSITION: Stock and/or January $55 calls to buy (FIC AK - low open interest).
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) CACI - Nice breakout!
2) HRH - Testing the breakout, but watch closely.
3) PSC - Taking a rest
4) LYTS - Big moves!
CACI (Caci International--$73.39; +3.54; optionable): Technical services. Splits 2:1 effective 12-7-01.
http://biz.yahoo.com/p/c/caci.html
STATUS: Great move! CACI broke out in September over 45, and after forming a lateral wedging pattern between 60 and 70, today broke out from that pattern, hitting a new high at 74.19. Volume was very strong on the move, coming in at 687,000 (average 290,000). This has been a solid pre-split move from the bottom of the wedging pattern, and on the breakout is still a buy up to 74.76 as we target 78. As with all pre-splits, we will carefully watch for topping signs as it moves, and could get another run out of CACI before the split on a breakout test.
PLAY: Still a buy up to 74.76 on continued strong volume, with stock and/or January $70 calls to buy (KQL AN - low open interest).
HRH (Hib Rogal--$61.38; -0.78; no options): Insurance brokers. Splits 2:1 eff. 1-2-01.
http://biz.yahoo.com/p/h/hrh.html
STATUS: HRH broke out Monday, continuing its move up started last week at the 18 day MVA (then 58, now 58.88). Volume was up sharply on the move Monday, though still below average, and HRH dipped back today after hitting up to 62.75. Volume was down on the drop, however, and we will look for HRH to hold its breakout point at 60.79 on this rest (10 day MVA at 59.77) for a continued move. Looking strong, and we are still out a ways from the split. Still, if we get a gap higher on existing positions and it starts to fall again, we will take some of the good profit we have and try to play it again. Target: 72.
PLAY: After holding 60.79 on a low-volume dip, back over 62 on above average volume. Stock only. Stop: 58.25.
PSC (Philadelphia Suburban--$30.05; -0.24; no options): Water utility. Splits 5:4 effective 12-3-01.
http://biz.yahoo.com/p/p/psc.html
STATUS: Got the breakout Monday as volume surged way up from recent levels in its consolidation over the 18 day MVA (29.16). After the three-day move up from the lows in the consolidation, PSC dipped back today on lower, but still very strong, volume of 222,800 (average 79,500). It held comfortably over the prior high in the pattern at 29.64, so we are looking for PSC to continue to show strength by holding over that level and then continuing this move. As it makes the move up 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. Money flow is excellent.
PLAY: After holding 29.64 on a lower volume pullback, a move back over 30.20 on above average volume. Stop: 28.75 (50 day MVA at 28.28).
LYTS (Lsi Industries--$25.59; +0.56; no options): Splits 3:2 effective 12-7-01.
http://biz.yahoo.com/p/l/lyts.html
STATUS: Outstanding pre-split move. LYTS made it back over its 50 day MVA (23.37) and made a big move up Friday, and has continued up since. The stock appeared to be topping Monday as it gapped up to a 'hanging man' doji, but it took off again today on volume that was way up and very strong (79,900; average 25,800). This has been quite a move from the recent lows at 22, but the stock is now lurking just below resistance from its October high at 25.95. We will see if LYTS has more on this run, but with current positions we have some more confidence after the strength today, although we are still ready to react if we see topping signs. If it can muscle over resistance with a strong move, we can look at more positions but watch resistance from the all-time high at 27.65, which was our initial target. Excellent money flow and buying.
PLAY: From here: 26.07 on continued strong volume. Stop: 24.50. Stock only.
CONTINUING CANDIDATE BEST PLAYS:
1) STJ - Double bottom with handle
2) AZO - Still in an ascending wedge/flying plateau
STJ (St. Jude Medical--$73.50; -0.23): Health Services.
http://biz.yahoo.com/p/s/stj.html
BACKGROUND: Based upon our research it does not appear that STJ has ever split its stock. The annual shareholder meeting was on 5-17-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Little change today as STJ pulls into a handle to a small double bottom. After making a terrific move last week (spurred by good product news and an upgrade), STJ is pulling into a lateral consolidation. Today it showed another loose doji as volume fell to 538,700 (average 710,700). We are still looking for the momentum to resume. We may see more of pullback, and if we get it, we are looking for the early November highs in the 73 range to provide support (10 day MVA at 72.06). The stock has made a solid run up over the past 19 months, occasionally dipping back to the 200 day MVA (last time in September) between bounces along the 50 day. Target: 83.
BUY POINT: Breakout: 74.47 on volume of 1 million. Stop: 70.
POSITION: January $70 calls to buy (STJ AN).
AZO (Autozone--$66.25; -0.65; optionable):
BACKGROUND: Last announced a 2:1 split in March of 1994 at $60.
http://biz.yahoo.com/p/a/azo.html
STATUS: Still holding over support, and we are still watching for AZO to take off.
The stock broke out in September and has made a couple of very strong moves followed by consolidations over the short-term MVA's. After hitting a high of 68 recently AZO has pulled laterally over its 10 day MVA (65.90), today closing with a small loss on the day, but holding that support as volume increased slightly, although remaining below average at 712,700 (average 1.33 million). AZO is still moving in a small ascending wedge here, and we are looking for a strong move to push it to another breakout. It has been a strong run over the last two months, so we will protect profits carefully while targeting 80.
BUY POINT: 68.12 on volume of 1.84 million. Stop: 63.75 (18 day MVA at 64.47).
POSITION: Stock and/or March $65 calls to buy (AZO CM).
POST-SPLIT BEST PLAYS:
1) AMHC - Holding a solid pattern post-split
AMHC (American Healthways; $28.36; +0.04; no options): Health Services. Split 3:2 effective 11-26-01.
http://biz.yahoo.com/p/a/amhc.html
STATUS: Still holding the pennant. AMHC split Monday, and promptly tested down through the 18 day MVA (27.44) before pulling up to close over the recent support of the 10 day (28.06) with a small gain on the day. It gapped back to open at that support today, but pushed up once again as volume increased slightly to 90,000 (average 122,900). This pennant pattern is looking good, and we are still watching for a volume surge to carry a move over the recent highs. Of course, stocks can quickly slump post split, but so we will watch for support to hold before we get the move. Target: 35.
PLAY: The buy point is 29.55 on minimum volume of 165,000, with stock. Stop: 27.50.
MARKET FAVORITES BEST PLAYS:
1) CHKP - Looking for a move up from support
2) KLAC - Very strong breakout move
3) EMLX - Another very strong mover
CHKP (Check Point Software Tech--$39.40; -0.10; optionable): Software
http://biz.yahoo.com/p/c/chkp.html
STATUS: The consolidation over support looks good. CHKP broke out to a high of 43 earlier this month, and on the test of that move, caught support at 37.50 and quickly pulled back up over the 10 day MVA (38.91). Now the stock is holding in a brief consolidation over that support, today testing down to the 18 day (37.42) before pulling back up to close with a loose doji over the 10 day as volume increased to 13 million (average 9.41 million). Still looking for a continued hold here ahead of a rally and a strong move back over the recent high. With today's higher volume doji we could see the move soon. Initial target: 200 day at 48.13.
BUY POINT: Aggressive: 40.50 on continued strong volume. Stop: 37.67 (7%). Break of resistance: Over 43 on average or higher volume. Stop: 40 (7%)
POSITION: Stock and/or January $35 calls to buy (KEQ AG).
KLAC (Kla-Tencor; $52.17; +2.12; optionable): Semiconductor.
http://biz.yahoo.com/p/k/klac.html
STATUS: Strong breakout today! KLAC has been moving in a cup with handle dating back to early August, most recently pulling back from a handle high of 51.90 to support at the 50 day MVA (44.69, 200 day at 46.61). The stock began moving up from that level late last week, setting up this terrific move. Today KLAC initially tested down to the 10 day at 48.88 before reversing itself and taking off on sharply increased volume of 18.7 million, (average 8.94 million). It did pull off the high with the market to close, so we will see if the upward momentum continues tomorrow, or if we see a lower-volume pullback that can hold over the prior handle highs. Left side high is 59.70 (with May-June highs at 61), so 61 will be out initial target.
BUY POINT: From here or after a lower volume test of the 51-52 range, a move over 53.24 on continued strong volume. Stop: 49.50.
POSITION: Stock and/or January $50 calls to buy (KLA ).
EMLX (Emulex--$31.08; +2.73; optionable): Computer Peripherals.
http://biz.yahoo.com/p/e/emlx.html
STATUS: Great breakout today! Another old tech friend that is deep in its base. After hitting a low of 8.40 in late September, it bounced up the short-term MVA's, hitting a recent high of 30.09 before pulling back slightly into a handle consolidation along the short-term MVA's and under the resistance of the 200 day (27.72). After clearing the 200 day Monday, today EMLX shot up and cleared the handle high (30.09) on its way up to a high of 31.94, moving on sharply increased and powerful volume of 15.88 million (average 7.04 million). Still a buy on this move up to 31.59, but if we get some market weakness we will look for a lower volume pullback holds 30 for a another strong move up. Initial target is 36.
BUY POINT: A buy up to 31.59 on continued strong volume. Stop: 29-29.30. After holding 30 on a low volume pullback, a move back up in a strong market. Stop: 28.
POSITION: Stock and/or January $25 calls to buy (UMQ AE).
****
REMAINING PLAYS:
****
PRE-ANNOUNCEMENTS REMAINING PLAYS:
Watchlist:
GTK ($43.64; +0.04): Forecast to announce a split on 12-13-01 in conjunction with earnings. At this time the company has not confirmed a time for the release. Trying to hold on, fighting back Monday from a low of 41.21 but managing to close over the 18 day (43.22), and showing a doji over that level today. Next support is down at 40, and we are still looking where it will find support.
SONC ($32.85; -0.99): We are working on a date. Made a low-volume move up, but dipped back again today. A harder drop but it closed on the 10 day MVA. The 50 day is below at 31.93.
TRDO ($26.85; -0.75): Forecast to announce a split in the beginning of December in conjunction with a board meeting. The company will not confirm the board meeting but based upon our research the board meeting should take place at this time. Gave up the 50 day (27.14) on sharply higher, though still below average volume. We will see if it can hold on, but it does not look too promising at the moment.
EASI ($41.86; +1.26): Forecast to announce a split on 12-10-01 in conjunction with earnings. At this time, the company cannot confirm this date. Has crept up on low volume, today trying a move over the 10 day MVA (42.32) but not holding. Still a put on a drop back through 39.50 on above average (453,400; today 251,800) volume, with January $50 puts to buy (UFE MI - very low open interest).
End Part 2 of 3
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