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Begin Part 2 of 3

THE PLAYS: Great breakout by best play AMHC post-split! Many, many great looking patterns on the report. They have been setting up and are raring to go.

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: Great moves by GNSS and INXX, and HDI still looks good!

NSM (National Semi--$31.75; +1.36; optionable): Semiconductor.
http://biz.yahoo.com/p/n/nsm.html
STATUS: NMS, deep in its base, has pulled into a cup with handle since August (left-side high 35.10), hitting up to 33.80 this month before dropping back into the handle. The handle has been using the 18 day MVA (30.63) as support, today moving back up off of that level as volume continued to decrease (1.42 million; average 2.66 million). The last bounce up hit 32.34, and we are targeting that point for aggressive positions. Target on a breakout: 40.
BUY POINT: Aggressive: 32.46 on above average volume. Stop: 30.19 (7%). Breakout: 33.92 on volume of 4 million. Stop: 31.55 (7%).
POSITION: Stock and/or February $30 calls to buy (NSM BF).

SOX (Phili Semi--$533.17; +21.73; optionable):
STATUS: The index has formed an ascending wedge with upper resistance at both 535 and 555 (the latter at the level of two highs in the pattern). It bounced nicely from the 18 day MVA today, and as the rally goes forth we look for a continued climb. A breakout from the pattern presents aggressive entry points since the 200 day MVA is above the wedge at 563. Thus, the highest buy point is on a breakout; below that are 2 aggressive entries at 537 (the index hit 536.67 three times in the last few days) and just over 550 (over Tuesday's intraday high, which would be on a breakout from the wedge itself). Resistance may be stronger just below the lowest buy point, however.
BUY POINT: Aggressive: 537 in a chip rally. Breakout over the 200 day MVA: 550.33 on rising volume.
POSITION: Aggressive: December $530 calls to buy (SJX LF). Breakout: December $540 or $550 calls to buy (SJX LH or LJ).

QQQ (Nasdaq 100--$39.95; +1.20; optionable):
STATUS: Another ascending wedge is being formed by the QQQ; the pattern has an errant high (from Tuesday) that at 40.97 tapped at the current level of the 200 day MVA (actually at 41.24 today). We are looking for a breakout from the pattern for taking aggressive positions, with a move over the 200 day MVA offering a higher level buy point. The index has had a nice run up from the September lows, and needed this consolidation. We will see if it can break both resistance levels. Target: initial, 42.50
BUY POINT: Aggressive: 40.50 on volume in the range of 113 million (was down Thursday to 83.6 million; avg. is 84 million). Stop: 37.67 (7%). Breakout over the 200 day MVA: 41.37 on similar volume. Stop: 38.47 (7%).
POSITION: January $40 calls to buy (QQQ AN).

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-Announcement NDN, Pre-Splits CACI and KIM, and Continuing Candidate STJ.

PRE-ANNOUNCEMENT BEST PLAYS
1) SRCL - Doji over support
2) THQI - Strong bounce of the 50 day!
3) BBY - Still testing the breakout

SRCL (Stericycle--$56.19; +0.14; 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: Holding support. SRCL has made a solid move since the attacks, and made a solid bounce earlier this month from the 50 day MVA (then 47.50; now 50.20). It used the 10 day MVA (55.37) for a nice bounce earlier this week, hitting a new high at 58.50 before retreating with the market yesterday. However, it appears to again have caught the 10 day MVA, showing a 'shooting star' doji over that level today on lower volume (224,800; average 266,500). Poised for another move, and we will see if it can give us a bit more this time, targeting 65.
BUY POINT: Bounce: 57.25 on above average volume. Stop: 53.75 (18 day MVA at 53.91). New high: 58.62 on increased volume. Stop: 55.
POSITION: Stock and/or February $55 calls to buy (URL BK).

THQI (THQ Inc.--$56.00; +3.95; 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: Finally made a move. THQI had gradually dropped but held the 50 day MVA (51.95), moving in a choppy lateral pattern in its October range. Today it blasted back up, moving over recent highs at 56 on sharply higher, strong volume of 1.92 million (average 1.27). The next level of resistance is the highs on its most recent breakout, at 59.79. Looking for continued momentum after this strong move. Beyond the recent high is the all-time intraday spike at 62, and if we get a strong move we will watch that level carefully as we target 66.
BUY POINT: 57 on continued strong volume. Stop: 53.25 (18 day MVA at 53.50).
POSITION: Stock and/or January or March $50 calls to buy (QHI AJ or QHI CJ).

BBY (Best Buy--$70.25; +0.35; optionable): Forecast to announce a split on 12-18-01 in conjunction with earnings. The company has not confirmed a time for the release.
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: After its strong move Monday, BBY has gently dipped back to test the highs in the left side of its cup (69.90). The action has been good, with volume decreasing each session (2.33 million today; average 3.6 million), and today the candlestick showing a 'shooting star' doji. We will see if BBY shows some renewed strength after this rest, or if it needs to pull back a bit more in a handle, testing its 10 day MVA (68.16) again. In its 1998 split range, and we are targeting 80 on a solid move.
BUY POINT: 71.72 on above average volume. Stop: 67.
POSITION: Stock and/or January $65 calls to buy (BBY AM).

PAST SPLITS BEST PLAYS: These are former splitters that look ready again.
1) FIC - Still in the nice consolidation
2) LUV - Ditto

FIC (Fair Isaac & Co--$57.71; +1.01; optionable): Business services.
http://biz.yahoo.com/p/f/fic.html
STATUS: Still in the handle to its cup, gently drifting back over the support of its short-term MVA's (10 day & 18 day at 57 and 55.80). Today the stock made a move up to 58.60 but volume was low at 94,000 (average 178,300). FIC tried to breakout of its cup with handle Monday, but it pulled back from 59.98 as volume was again low. 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).

LUV (Southwest Airlines--18.59; +0.10; optionable):
http://biz.yahoo.com/p/l/luv.html
STATUS: LUV continues to pull laterally over the 200 day and 10 day MVA's (17.81 and 18.38), using the 10 day for intraday support. Today LUV suffered a downgrade but it had little effect on this stock, as it pushed up slightly from the 10 day on increased, but still below average volume of 2.5 million (average 4.17 million). Still looking pretty solid in something of a cup with handle, and relative strength has broken out. On a move over 19, stock for long-term positions.
BUY POINT: Over 19 on above average volume. Stop: 17.67.
POSITION: Stock.

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) CHBS - Looking good!
2) HRH - Nice test of the breakout
3) PSC - One more move before the split?
4) LYTS - Holding up after the big move

CHBS (Christopher & Banks--$39.00; +1.16; optionable): Retail apparel. Splits 3:2 effective 12-13-01.
http://biz.yahoo.com/p/c/chbs.html
STATUS: CHBS recently broke from its ranging handle to a cup (dating back to May, high of 47.50), and has formed an ascending wedge. The stock has hit resistance twice at 39.40, but has held support each time at the 18 day MVA (currently 36.86), making higher lows. Today it made a nice bounce up from the 18 day, moving on sharply high volume of 446,900 (average 402,600). The target on a move over the high is 48, but with all pre-splits we stand ready to take profits as stocks can be volatile at this time.
PLAY: 39.52 on volume of 540,000, with stock and/or January $35 calls to buy (URH AG). Stop: 37.

HRH (Hib Rogal--$60.90; +0.15; 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 59.27). Volume was up sharply on the move Monday, though still below average, and HRH has now dipped back after hitting up to 62.75. It is not looking bad as it tests the breakout, holding over the 10 day MVA (60.12) and its prior breakout point at 60.79, while moving on low, decreasing volume (34,800; average 114,400). With the loose doji today, HRH is looking good for another move. We will look for it to take out the recent high, looking for topping signs to tell us when to get out and take our profits. Target: 66.
PLAY: Over 62 on above average volume. Stock only. Stop: 58.25.

PSC (Philadelphia Suburban--$30.00; 0.00; no options): Water utility. Splits 5:4 effective 12-3-01.
http://biz.yahoo.com/p/p/psc.html
STATUS: Got the breakout Monday with a huge volume surge, and since then PSC has pulled back but held comfortably over its prior breakout (29.64) and 10 day MVA (29.67). Off of Wednesday's "shooting star" doji, PSC could only gap up slightly and pull back on bigger volume (84,400; average 81,800). Off of that candlestick we could see a move back to support, so we will be ready to take profits on any remaining positions, but with one session to go before the split we will see if PSC can give us one more solid move. On the move keep in mind the recent intraday spike at 30.80. Money flow is excellent.
PLAY: A move over 30.20. Stop: 29.

LYTS (Lsi Industries--$25.38; -0.08; no options): Splits 3:2 effective 12-7-01.
http://biz.yahoo.com/p/l/lyts.html
STATUS: Holding up well after an outstanding pre-split move. LYTS made it back over its 50 day MVA (23.53) and made a big move up last Friday, and continued up this week before dipping the last couple of sessions. A healthy pullback, however, with LYTS showing a couple of loose dojis on decreasing volume (11,600 today; average 25,800). This has been quite a move from the recent lows at 22, and the stock is now lurking just below resistance from its October high at 25.95. After this bit of rest, we will see if LYTS has some more on this move. It could still drop off, so we are protecting existing profits, but 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 above average volume. Stop: 24.50. Stock only.

CONTINUING CANDIDATE BEST PLAYS:
1) AZO - Could go either way here
2) BJ - Strong selling again

AZO (Autozone--$66.57; +0.81; 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 the pattern. AZO 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), and into a small ascending wedge. We were looking for a breakout off of Tuesday's higher low, but it pulled back again before trying a move today. AZO pushed up off of the 10 day to hit an intraday high of 67.70, but the slightly higher volume of 887,300 was still below average (1.32 million), and it couldn't hold on and fell back to close. It is getting to the point where it could go either way, but note that before its recent big runs AZO dipped down for a session, shook out the last sellers, and then raced ahead. The moral: don't give up on a leader. We want it to hold at the 10 day (but the 18 day is just below at 64.81) for a stronger attempt to move up. 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 1.9 million. Stop: 63.75.
POSITION: Stock and/or March $65 calls to buy (AZO CM).

BJ (BJ Wholesale--$44.20; -0.86; 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: Hit our aggressive buy point today. Like so many others, BJ had pulled into the familiar V-shaped cup-with-handle, but was struggling to hold the handle pattern over the loose convergence of the short-term & 50 day MVA's (then 50-51, late October-early November). It gave up that support earlier this month, eventually taking a hard drop through the 200 day (49) and falling to a low of 42.97. Since then it has made a weaker push up but has run into resistance and has bouncing down the 10 day MVA (46.06). It hit our aggressive put buy point today, as it fell to a low of 43.85 on sharply increased selling volume of 1.16 million (average 769,300). Our initial target was 42, but with the strong volume we are now eyeing additional positions for a drop down to 40 (September low 39.25).
BUY POINT: A drop through 43.85 on continued strong selling volume.
POSITION: January $50 puts (BJ MJ).

MARKET FAVORITES BEST PLAYS:
1) KLIC - Nice move up from support
2) KLAC - Moved back up
3) SUNW - Looking to breakout

KLIC (Kulicke & Soffa Ind--$16.93; +0.42; optionable): Semiconductor
http://biz.yahoo.com/p/k/klic.html
STATUS: KLIC is another old favorite that is deep in its base, although not so deep as many other techs (left side highs in the 44 range from February 2000). At the beginning of November, it broke from a cup-with-handle (dating back to early August) with a strong move. The stock hit a high of 18.82 (over the left-side high at 18.30) before pulling back, closing under the 18 day MVA (16.61) last week. This week KLIC has struggled to move back up, but below average volume has been a problem and the attempts have stalled. On today's push up over the 10 day (16.88), volume shot up to 1.52 million (average 1.14 million), so we are looking for continued momentum to carry the stock back up toward the recent highs. If it can clear 19, we will target 23. It may have some trouble with the NVLS conference call, but lets just let it work through it and hit the buy points. No reason to sweat over it.
BUY POINT: Aggressive: A move over 17.75 on continued strong, above average volume. Stop: 16.51 (7%). The breakout buy point is 18.94 on minimum volume of 1.7 million. Stop: 17.61 (7%).
POSITION: Stock and/or January $15 calls to buy (KQS AC).

KLAC (Kla-Tencor; $52.76; +2.94; optionable): Semiconductor.
http://biz.yahoo.com/p/k/klac.html
STATUS: Nice recovery today! What will tomorrow hold with the NVLS news? We will see. 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 (45.20, 200 day at 46.75). The stock began moving up from that level late last week, making a terrific breakout Tuesday, followed by a lower volume drop the next session. Today KLAC briefly tested down through the 10 day MVA (49.73) before reversing itself and pushing up to close near the breakout highs on slightly higher volume of 9.90 million (average 9.20 million). Looking for this momentum to continue and propel KLAC up toward the left side high (with May-June highs) at 61, which remains the initial target.
BUY POINT: From here: A move over 53.24 (recent breakout high) on increased volume of about 12 million. Stop: 49.50.
POSITION: Stock and/or January $50 calls to buy (KLA AJ).

SUNW (Sun Microsystems--$13.81; +0.65; optionable): Computer Hardware.
http://biz.yahoo.com/p/s/sunw.html
STATUS: Looks ready to move! Yet another former splitter that is deep in its base (mid-2000 highs near 65), and looking ready to set up some nice plays. SUNW is currently moving in a 4-week handle to a cup dating back to early August (September lows at 7.50), and holding support over the 10 day MVA (13.19). The stock made a nice push up from that level today, hitting an intraday high of 13.99, as volume increased to 71.05 million (average 51.16 million). The handle high is 14.03, so we are looking for increased volume to carry a breakout move over that high. After a breakout, the 200 day is at 15.32, if SUNW can clear that level, we can look at additional positions from there as it continues to move up the right side. Initial target: the 200 day, but looking for more.
BUY POINT: Breakout: 14.15 on volume of 75 million. Stop: 13.16 (7%).
POSITION: Stock and/or January $12.50 calls to buy (SUQ AV).

End Part 2 of 3

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