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Begin Part 2 of 2
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:
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. A "prior high" refers to the high at the start of a base.
For conserving space on listings of stop losses, the symbol (7%) indicates that the stop is 7% below the buy point.
Good movers: PENN, BLTI. Some subscriber's choices that have looked good recently are BVSN, BEAS, EXTR, ALLY, DFXI, and GE (still in the ranging pattern above its 10 day MVA). OCLR in that group is pulling back from its breakout last week.
Stocks/Indexes from Saturday's report:
RNDC: Subscriber's choice. Pulled back down after hitting resistance at 6.
PENN: Broke out! Volume was strong on the move. A buy to 26.17 on this move.
NVLS: A nice move up before selling back; it hung onto the new closing high for this month, however. Volume was strong.
BLTI: Breakout! Volume was huge on the move; a buy to 6.31.
EMLX: A strong move today with big volume. Broke resistance at 30.
IDPH: Pulled back with a doji off yesterday's seeming incipient breakout move.
Previous plays:
BEAS: A new closing high for November; volume shot well above average with the stock pulling off its high. Can head higher if the market obliges.
BVSN: Still pulling back, tapped the 10 day MVA on the low.
CPWR: Held above the 50 day MVA for the second day, but is still below the down trendline in the descending wedge pattern (see the 11-24 report).
GDT: Testing the breakout; looks ready to pull back to the 10 day MVA.
MCHP: Inched higher in the attempt to break out, but on the strong volume couldn't take out the buy point in the handle.
NABI: A nice move up, clearing lower resistance in the handle but pulling off the high that broke out over the November high. Volume was huge.
QLGC: Getting ready to take out the November high (49.16). Volume was strong on the move up. Looks good!
SUBSCRIBER'S CHOICE:
MRVC (Mrv Communications--$5.66; +0.10; optionable): Semiconductor
http://biz.yahoo.com/p/m/mrvc.html
STATUS: MRVC is very low in long base that started back in March of 2000, at the highs near 96, and currently isn't that far off the lows near the 2.25-2.50 range. However, it is off that floor, crossing back over the 50 day MVA (currently at 4.58) back in October and again this month, most recently moving above the October high at 5.15. It is now consolidating above that and the 10 day MVA (5.18) with volume dropping back below average the previous three days (down Tuesday to 825,800; avg. 1 million). The stock is likely to hold above 5 until it works through this somewhat lateral movement, and can then break out; initial target on the move would be at the 200 day MVA (currently at 7.56). Showing strong money flow and decent buying.
BUY POINT: Breakout: Over the November high at 6.20 on volume of 1.4 million or higher for positions with January $5 calls to buy (VQX AA; delta is 0.69).
http://www.investmenthouse.com/cd/mrvc.html
Best Plays:
1) HTLD: Pulling back in a handle.
2) QCOM: A tight doji at support.
3) TIER: A nice test of the breakout.
4) IGT: Still a nice-looking pattern, and looks ready to head up from here.
New:
HTLD (Heartland Express--$28.55; -0.38; no options): Trucking
http://biz.yahoo.com/p/h/htld.html
STATUS: Got to move those goods no matter what. Pulling back in the handle to a cup base of 15 weeks. The stock tapped support at the 10 day MVA on the low (28.40) with volume rising to 90,200 (avg. 113,000) which indicated some selling. We will look for a hold at the support however; the intraday low is a nickel above the October high, additional support. If it moves below the 10 day and that former high, we will have to see how the handle shakes out over the rest of the week. HTLD has excellent money flow and good buying. Target: 36
BUY POINT: 29.93 on volume of 170,000 or better. Stop: 27.83 (7%)
POSITION: Stock.
http://www.investmenthouse.com/cd/htld.html
Update:
A credit spread:
QCOM (Qualcomm--$60.02; -0.38; optionable): Telecom Equipment
http://biz.yahoo.com/p/q/qcom.html
STATUS: Is in a cup with handle dating from late July that is part of the much larger base of about 2 years length (highs at $200). The handle is choppy, showing a forming pennant, and volume was decreasing nicely until the last 2 days when it shot up Monday (down slightly Tuesday at 14 million; avg. 16.9 million). However, that is still below average, and QCOM closed back over its 10 day MVA after hitting support on the low (the 200 and 18 day MVAs at the 58 range). Showing a tight doji at the higher support, we are looking for a move up and over the November high (62.49). Target on a breakout: 75
BUY POINT: 62.62 on volume of 25 million or higher. Stop: 58.24 (7%)
POSITION: Stock and/or January $55 calls to buy (AAO AK). Credit spread: December $60 puts to sell (AAO XL) and December $55 puts to buy (AAO XK) for a net credit of $1.50 or better.
http://www.investmenthouse.com/cd/qcom.html
TIER (Tier Technology--$17.52; -0.12; no options): Information Software
http://biz.yahoo.com/p/t/tier.html
STATUS: Testing its recent strong run up from the 50 day MVA, its second run up from that support since later last month. The stock is in a long cup base of almost three years, and at the recent high completed the right side of that base (which is part of an even larger base). Now it is pulling back on low, below average volume (down Tuesday to 156,600; avg. 259,000), and today tapped the 18 day MVA on the low of 16.75. TIER showed a doji on a closing price just on top of its 10 day MVA, support which is just above the October high at the 17 range. It looks like it can move up from here on strong and rising volume, and we will look for that move. The stock shows excellent money flow and buying. Target on a move over the November high (19.71): 24
BUY POINT: Aggressive: 17.95 on volume of 260,000 or higher. Stop: 18 (7%). Breakout: 19.84 on volume of 389,000 or higher. Stop: 18.45 (7%)
POSITION: Stock.
http://www.investmenthouse.com/cd/tier.html
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: New Leaders (new list): ACS, NVDA, DGX, FRX, LLL, CACI, AJG, KRON, MIKE, BMET, APPB, LOW, IDPH, TARO, MYL, IGT, VRSN
A covered call sale play:
TARO (Taro Pharmaceutical--$37.15; -1.22):
http://biz.yahoo.com/p/t/tarohtml
STATUS: On strong and rising volume (1.05 million; avg. 720,000), moved just under some support at 37.50. The stock has been moving up and down between that support and upper resistance at the 50 day MVA (39.51) for several days, and may be losing the fight to get back over the moving average. On selling down to the 200 day MVA (32.95), we are looking at selling some December $35 calls, buying them back when the stock hits the support level and holds there. The $35 calls are riskier since they are about $2 in the money, but on a quick fall that can change; they were selling at $4.20 at the close.
BUY POINT: 37 on continued rising volume and selling.
POSITION: December $35 calls to sell (QTT LG).
http://www.investmenthouse.com/cd/taro.html
An aggressive trade:
VRSN (Verisign--$40.03; +0.01; optionable): Internet Software
http://biz.yahoo.com/p/v/vrsn.html
STATUS: VRSN is below the 200 day MVA (at 47.84), resistance that has sent the stock back down twice last month and once this month. On the lower end, VRSN is holding support at an up trendline that connects the April, September and November lows, and tapped that on the intraday low of 38.06. Volume was up and above average at 14.2 million (avg. 11.4 million) with the stock showing a doji in a 3-day lateral movement. We look for a move up from here, or from the range of the trendline, for a move up to the 200 day MVA (47.84, currently), a run similar to what VRSN accomplished the first 2 weeks of this month. This is an aggressive play since the stock is below the 200 day, but from here a move up to 47 can offer a nice, quick return. We emphasize: not a long term play; get the gain and get out unless something major happens.
BUY POINT: Aggressive: 41 on continued rising volume. Stop: 38.13 (7%)
POSITION: Stock and/or January $35 calls to buy (QVR AG).
http://www.investmenthouse.com/cd/vrsn.html
A credit spread and just a good buy point coming:
IGT (Internat Game Tech--$61.06; -0.56; optionable): Leisure
http://biz.yahoo.com/p/i/igt.html
STATUS: Looks good in the handle to the cup base, which is just over 5 months in length (not counting the handle). The high in the handle is at 63.62, so aggressive players may wish to consider taking early positions on a strong move up from today's doji, which ended the day right above the 10 day MVA (60.96). Volume continues to decrease in the handle, though it was slightly higher today at 649,300 (avg. 1.3 million), so it looks good as well. On the breakout we are looking at a target near the 77 range. Money flow is strong, and buying looks good.
BUY POINT: Aggressive: 61.50 on rising volume in a rally. Stop: 57.20 (7%). Breakout: 63.75 on volume in the range of 2 million or higher. Stop: 59.29 (7%)
POSITION: Straight stock or call buy: Stock and/or January $55 calls to buy (IGT AK). Credit Spread: December $60 puts to sell (IGT XL) and December $50 puts to buy (IGT XJ) for a net credit of $1.50 or better.
http://www.investmenthouse.com/cd/igt.html
NVDA: Tried to hold a move to 55.30 but pulled back after Monday's strong move up.
CACI: Broke out on strong volume to a new all-time closing high.
MYL: Is back over the short term moving averages and 50 day for the last week or so. Volume remains low, so look for consolidation above that support until a rally.
KRON: A test of the 50 day MVA last week, and now is over the short term moving averages on very low volume.
APPB: Sold back before breaking out; holding at the 10 day MVA today. Volume strong so may test the lower 18 day MVA.
UP & COMERS PORTFOLIOS: Here is the new portfolio list: BBBY, EPIQ, KKD, MMS, NDN, SRCL, CPRT, BJ, EBAY, THQI, KG.
THQI: Moved back over the 18 day MVA. The stock is holding the lower 50 day MVA but is unable for the last 2 weeks to break above resistance at the intraday high (55.49 range). This is a handle to a ragged 4-month cup.
EBAY: Pulled back on lighter volume from the breakout. Moved back up from a test near the 10 day MVA, clearing the opening price, so not bad action even with the (small) loss.
KKD: Back at the 18 day MVA in the handle. Volume was above average, so this is not great action, but the stock did claw back from a low of 37 to close at the support.
SRCL: A new all-time closing high today, on rising volume, so there may be more to this move.
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
AMAT: Has been moving up for 4 days, today almost clearing resistance at the previous November high (42.18) but closing just lower at 41.97. The 200 day MVA is ahead at 44.37; that was a new closing high for the month, however.
AOL: Still holding at the 10 day MVA, but volume was strong and above average. If the support is broken, look for the lower 18 day MVA (36.11) to hold the stock in the recent pullback off the month's high (39.21).
BRCM: Pulled off the high of 52.33; was ready to head higher but the market wouldn't let it hold the move. Volume very strong.
JNJ: Holding above the 18 day MVA with a doji.
CHKP: Still looks very good in this handle to the 4-month cup with handle pattern.
Buy point is 43.11.
HGSI: Still in the ascending wedge-type consolidation, holding above the 18 day MVA. Buy point is 47.83 (11-19 report).
PXLW: Keeps on chugging, like the Eveready battery. Now moving up on rising volume. It has been climbing for over 2 weeks!
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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