us stock market, stock watch

Begin Part 2 of 2

Support and Resistance

Nasdaq: Closed at 1904.90.
Resistance: 1930 to 1940. 1940 is the breakout of the ascending wedge, but it needs to clear the 200 day MVA at 1951.77as well. The March 2000 down trendline is at 2020 (intraday prices), and the closing price trendline is at 2175.
Support: The up trendline is 1900. 1875 is still the bottom of the recent trading range. The 18 day MVA is right there at 1880.40. Below that is 1800 and the 50 day MVA at 1814.03.

S&P 500: Closed at 1129.90.
Resistance: 1150. The March 2000 down trendline is at 1160. The 200 day MVA is at 1177.96.
Support: The up trendline is at 1134. The 18 day MVA is right there at 1131.70. Then there is 1125, a level of prior consolidations. The 50 day MVA is next at 1117.54. Then 1103, the old closing low in the double bottom from March and April.

Dow: Closed at 9763.96.
Resistance: 9992 (former top and bottom). The 200 day MVA is at 10.151.50. The upper channel is at 10,200, coincident with some prior price resistance at that level.
Support: The up trendline is at 9750. The 50 day MVA is 9628.97. 9500 also acts as support independently.

Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.

12-3-01
Auto Sales, November (8:30): 6.8M versus 7.8M prior.
Truck Sales, November (8:30): 7.9M versus 9.8M prior.
Personal Income, October (8:30): 0.0% actual versus +0.1% expected and 0.0% prior.
Personal Spending, October (8:30): 2.8% actual versus 1.9% expected and -1.6% prior (revised from -1.8%).
NAPM Index, November (10:00): 48.8 actual versus 41.9% expected and 39.8% prior.
Construction Spending, October (10:00): +1.8% actual versus -0.5% expected and -0.4% prior.

12-5-01
NAPM Service, November (10:00): 42.5 versus 40.6 prior.

12-6-01
Initial Claims, 12/01 (8:30): 488K versus 488K prior.
Productivity Rev., Q3 (8:30): 2.6% versus 2.7% prior.
Factory Orders, October (10:00): 1.0% versus -6.2% prior.

12-7-01
Nonfarm Payrolls, November (8:30): -210K versus -415K prior.
Unemployment Rate, November (8:30): 5.6% versus 5.4% prior.
Hourly Earnings, November (8:30): 0.2% versus 0.1% prior.
Average Workweek, November (8:30): 34.0 versus 34.0 prior.
Consumer Credit, October (3:00): $1.5B versus 3.2B prior.

TEAM TRADES

As mentioned in the weekend report, we bought BORL stock on its breakout from a cup with handle Friday. The stock hit a high of $15, but like so many stocks that day, pulled back and closed just over its breakout point.

What we have been seeing in our Time & Sales chart is instructive. On Friday, there were many block trades made by institutions. A bunch of these came in before the close, and the trades were made as much as $0.12 below the current bid. While we would normally look at the ask side to see buy-side trades, the block trades at the lower price still represented accumulation because the bid and ask were adjusted to reflect those trades on the buy side. A couple of things were most likely going on.

First, market makers sometimes bundle many orders at the end of a session into a few, larger trades. Thus we could be looking at some orders that were put in earlier and are being filled later in the session in a bundle at the earlier price. It does not really impact the bid and ask once the trades are completed as you will see the bid and ask bounce right back up to where they were before the trades took place.

Second, there are times that large buyers are able to broker a better price when buying or selling stocks in large blocks. It is the market maker taking on the risk in buying the shares and having to turn them while still keeping an orderly market. Thus the buyer can sometimes get a 'negotiated' price that does not disrupt the market and gives a better deal. Today, when the stock showed a doji on much lower volume, we saw some more of that action, with a few large trades executed a couple of cents below the bid. We also saw some block trades made in a manner so they would not appear as block trades; that is, a series of consecutive trades made in 4600 and 400 increments adding up to in excess of 40,000 shares. That is another sign of an institution buying the stock.

With the solid pattern and accumulation, BORL looks good for a move back up from here with the market. We are targeting 17 initially for the next move, and at the 16-17 level we have some alternatives beyond just taking our profits. Premiums for January $15 calls should rise well over $2 if the stock makes 17 (it will be $2 in the money so they will more likely be 2.50 or better, and on topping signs at that level we can look at making a covered call play, selling the calls as the stock starts to pull back. Of course, we bought the stock below the $15 strike price, so if we end up getting called out we realize another $0.50 per share premium, for a return in the neighborhood of 20%. If we are not called out or we buy the calls back at a cheaper price as it tests its breakout, we can pocket the profit on our calls and continue to ride the stock on the next move up.

PLAYS TO LOOK AT:

BONUS PLAYS: RI broke out, and ASIA and EXLT still look good.

LXK (Lexmark International--$52.20; +0.53; optionable): Computer hardware.
http://biz.yahoo.com/p/l/lxk.html
STATUS: Deep in its base, and trying to make a move back up but has been rebuffed by its 200 day MVA (54.35) in both August and October. It is approaching that resistance again after making higher lows over the past couple of months, breaking over its 50 day (55) in mid-November, and then making a big bounce on good volume last Thursday after a test back to that level. Can you guess the pattern from that description? An ascending wedge. Volume has dropped back the last couple of sessions, today dropping to 821,000 (average 1.47 million) as it pushed up closer to resistance. We are looking for LXK to finally push through the 200 day, and with a strong move we are targeting 60 initially.
BUY POINT: Over the 200 day MVA on above average volume. Stop: 50.66 (7%).
POSITION: Stock and/or January $50 calls to buy (LXK AJ).

RADS (Radiant Systems, Inc.--$9.26; +0.05; no options): Computer software.
http://biz.yahoo.com/p/r/rads.html
STATUS: RADS is deep in its base, with left side highs at the 55 range from March 2000. Most recently, it has pulled up from October lows around 6, clearing the 50 day MVA's (then 8, now 8.35) in mid November and then pulling laterally into a consolidation at 9 with occasional dips down to the 10 day MVA (8.92). It closed Friday with a high volume doji over support, and tested down to that support again today before pulling up to close with a loose doji as volume fell sharply to 19,000 (average 159,300). Looking for above average volume to carry a move over the recent pattern highs with an initial target of 11.50 (the 200 day is at 12.58).
BUY POINT: From here or after another test of the 10 day, 9.52 on minimum volume of 215,000. Stop: 8.85.
POSITION: Stock only.

PRE-ANNOUNCEMENTS: TJX is forecast for this week but suffered a hard hit Monday on news of a downgrade by UBS Warburg. Besides the plays discussed below, we are also looking at NDN, SRCL and FDC as other decent patterns; please see the weekend report for a complete discussion.

IGT ($61.51; -0.48): Forecast to announce a split on 12-5-01 or 12-6-01 in conjunction with a board meeting. IGT followed Friday's nice move with a gentle test of the 10 day MVA (60.94) and then pulled up to close with a tight doji as volume fell to 734,100 (average 1.34 million). Not a bad move in today's market weakness and we want to see support to continue to hold while we wait for stronger conditions to support further upward momentum. The aggressive move remains a move over 62.50 on above average volume, while the breakout buy point is 63.74 on minimum volume of 2 million. With either play we are looking at stock and/or January $60 calls to buy (IGT AL).

AZO ($66.27; -1.03): Forecast to announce a split on Tuesday after the close, with earnings. Still holding the pattern. AZO sold back a bit today, but still held the small ascending wedge pattern and support at the 10 day MVA (66.25). Volume rose slightly to 763,000, but remained light (average 1.32 million). We want to see the short-term MVA's continue to provide support and we are looking for an announcement to trigger the breakout. The play remains 68.12 on volume of 1.9 million with stock and/or March $65 calls to buy (AZO CM).

WLP ($119.35; +1.45): Working on a date, but a pattern you can't refuse. WLP moved up in the handle today, closing near the handle highs as volume fell slightly to 451,300 (average 720,800). Still looking for over twice that volume to carry the breakout, but we could see some more consolidation in the handle before we get that move. Given the size of cup (13 months), that would be fine. We are using last Wednesday's intraday high as the breakout here, and continuing to watch the recent intraday breakout spike (122.90) as resistance. The buy point is 120.51 on volume of 1.1 million, with stock and/or January $115 calls to buy (WLP AC).

BMS ($49.99; -0.28): We are researching a date in January. Is it ready to breakout? Today BMS tapped down to the 18 day MVA (49.31) before pulling up to close with a tight doji over support as volume shot up to 405,200 (average 211,900). A high volume doji (especially over support) typically indicates change is afoot, so from here, we will keep an eye out for the breakout from this flying plateau. The buy point is 51.62 with continued strong volume (minimum 285,000). Stock and/or January $45 calls to buy (BMS AI).

PAST SPLITS: FIC still looking for a breakout.

LUV ($18.50; -0.25): Still pulling laterally and still holding support. LUV sold back a bit today, but held the 10 day MVA (18.46) as volume fell to 2.26 million (average 4.22 million). This is a nice looking handle to a lop-sided cup, and we are looking for a strong move to 19.09 on volume of 6 million for an opportunity to take long term positions with stock.

PRE-SPLITS: CHBS and KIM are still on the radar.

LYTS ($25.28; +0.03): Splits 3:2 effective 12-7-01. This pullback is looking good. As we head into the split, LYTS is holding a low volume pullback over 25, today trading in a very shallow range and closing with a tight doji as volume fell to 9,900 (average 25,100). The run that preceded this little consolidation was very strong, and now that LYTS has had a chance to digest those gains, we would like to see it resume going into Friday's split. From here the buy point is 26.07 on volume of 37,000 with stock only.

CACI ($73.29; -0.68): Splits 2:1 effective 12-7-01. Lower volume test today, just as we want. Last Friday's high volume doji indicated a possible pullback, and we saw something of that today. CACI tested back near the 10 day MVA (70.97), but then pulled up to close in the range of the recent highs (75) with small loss on the day as volume fell to 308,600, (average 311,500). On a further pullback, we want to see support continue to hold while we see if CACI gives us another move before the split. We are looking for a play off of the 18 day MVA at 68.90 or higher from the 10 day MVA to ride it back up to 75 to 76. Stock and/or January $70 calls to buy (KQL AN - low open interest).

CONTINUING CANDIDATES: APPB and STJ still trying to do something in their patterns.

RMD ($61.75; +3.25): Great move today! RMD spent most of last week creeping up the short-term MVA's (10 day at 58.61) on below average volume, and while we were looking for strength on a move up over the recent high (59.90), we were also watching out for a pullback. Today we got the strength, as RMD bounced off the 10 day and tore through our buy point and the left side high (61.39) on sharply increased volume of 409,400 (average 210,200). Still a buy up to 63, and we like to see breakout moves last more than a single session, but given the size of this gain we may see some quick profit taking, but if it can hold the left side high we can catch another move from there as well. From here, stock and/or January $60 calls to buy (RMD AK). After profit-taking, stock and/or January $55 calls to buy (RMD AK).

POST-SPLITS: PSC is holding the pattern post-split, and AMHC and MIKE are worth a look.

WFMI ($42.79; -0.12): Split 2:1 on June 5. Since the mid-November breakout (high: 43.14), WFMI has pulled laterally over 42 (in something of a flying plateau pattern), with an occasional test to the 10 day MVA (42.03). It tested down to that support again today, before pulling up to close with a tight doji as volume increased sharply to 996,600 (average 727,800). The high volume doji may signal that WFMI has rested enough and is ready to move again, so we will watch for the breakout move from here, with a buy point of 43.73 on volume of 800,000. Stock and/or January $40 calls to buy (FMQ BH).

MARKET FAVORITES: EMLX looking like it could move again.

NVDA ($53.81; -0.83): NVDA hit 55.99 in mid November (up from the early October lows near 23), and promptly moved into a small ascending with lows holding over the short-term MVA's. Last week the stock made a bit of a move on news it would be moving to the S&P 500, and this low-volume pullback to the support of the 10 day looks good to set up the next move. Today it closed with a loose doji as volume fell to 7.1 million (average 9.15 million). We are looking for the breakout on a move to 56.11 on volume of 12.3 million, with stock and/or January $50 calls to buy (RVU AJ). In a Nasdaq rally, the aggressive can play a move over 55.37 on above average volume, with stock and/or January $50 calls to buy (RVU AJ).

QLGC ($48.33; -1.12): We last looked at QLGC as it tried a breakout from its cup with handle. It has held on well since, and today QLGC tested down to the 10 day at 47.46 before pulling up to close with a tight doji as volume fell further to 8.84 million (average 11.03 million). We want to see support continue to hold while we look for above average volume in the range of 14 million carry a move over the recent high of 50.59. Stock and/or January $45 calls to buy. The aggressive can look at a bounce up from here in a tech rally, with the same positions.

Good Investing!
Jon L. Johnson and the Stock Split Report 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.

us stock market
stock watch