|
|
us stock market, stock option
* * * *
12/04/01 Technical Traders Report
* * *
Technical Traders Report Subscribers:
MARKET ALERT SERVICE
Subscribers to the current reports can sign up at the following link:
http://www.investmenthouse.com/alertttr.htm
THE PLAYS:
Good movers: MANU (on the report last week) broke out of its pullback pattern on strong volume. QLGC broke out over the November high; the stock had pulled off its initial attempt to break out of the cup with handle, but pulled back to the 10 day MVA and blasted off from there today. Is at our 5% limit for buying on breakouts, so is an aggressive buy from here before it pulls back again. FLEX broke out on above average volume, and MIL made its buy point on higher volume that was still below average.
Continued Plays: Other stocks besides those covered below that are making good moves include: CREE, PHM, CMOS, NETA, MRVL, SLOT, BORL, VRTS, CHKP Others that are in good position are IGEN, ORLY
IBM ($116.64; +2.51; optionable): Hardware
http://biz.yahoo.com/p/i/ibm.html
STATUS: Made a good move up in the handle on rising volume (6.5 million; avg. 8.6 million). Ready to break out of the 6-month cup with handle. Good money flow, and relative strength moving up. Target: 141.
BUY POINT: Breakout: 117.13 on volume of 13 million or higher. Stop: 108.93(7%).
POSITION: Stock and/or January $110 calls to buy (IBM AB). Credit Spread: December $115 puts to sell (IBM XC) and December $105 puts to buy (IBM XA) for a net credit of $1.65 or better.
PMCS (Pmc-Sierra--$24.54; +2.66; optionable): Semiconductor
http://biz.yahoo.com/p/p/pmcs.html
STATUS: Made its move today, moving up from a tap at the 18 day MVA on rising volume (11.2 million; avg. 10.8 million). The stock hit our aggressive buy point at 23.40, and looks ready now to take out the pennant pattern high at 24.51. Initial target: 29 (200 day MVA). High money flow.
BUY POINT: Breakout: 24.64 on volume of 14.6 million or higher. Stop: 22.92 (7%).
POSITION: Stock and/or January $20 calls to buy (SQL AD).
http://www.investmenthouse.com/ct/pmcs.html
KLAC (Kla-Tencor--$53.64; +3.71; optionable): Semiconductor
http://biz.yahoo.com/p/k/klac.html
STATUS: Broke out of the cup with handle on strong volume of 13.8 million (avg. 9.4 million). Buy point was just over 53.24 (November high), so the stock remains within our 5% limit, still a buy. Showing high money flow, and relative strength is breaking out.
Target: 60
BUY POINT: Remains a buy on the breakout up to 56.04. Stop loss from a buy point at 53.75: 50 (7%).
POSITION: Stock and/or January $47.50 calls to buy (KCQ AW).
http://www.investmenthouse.com/ct/klac.html
BRCD (Brocade--$33.83; +2.59; optionable): Hardware: Peripherals
http://biz.yahoo.com/p/b/brcd.html
STATUS: Broke out again over the 200 day MVA (32.08) with a nice rise in volume (still below average at 16.4 million). Buy point was 33.40, so BRCD remains a buy on this breakout from the lateral-type pattern is has moved in since early November. On the breakout we were looking at purchasing stock for a run up to the 40 range (initial target); upon weakness there and a fall back down, covered calls selling December $30 calls for a potential gain of 13-15%. Can look at entry points from here, since BRCD remains within our 5% limit for buying on breakouts.
BUY POINT: 33.90. A buy on the breakout up to 35.07 on above average volume (23 million or higher; avg. volume is 17 million). Stop: 31.53 (7%).
POSITION: Stock and/or January $25 calls to buy (UBF AE).
http://www.investmenthouse.com/ct/brcd.html
New:
LTD (The Limited--$13.94; +0.17; optionable): Retail: Apparel
http://biz.yahoo.com/p/l/ltd.html
STATUS: LTD is off its fall 2000 high near 28, the start of a 13-month base in which the stock is off lows around 9. The stock has looked better since running up from those lows, peaking in November at 14.43 and now forming a pennant pattern above the 10 day MVA (13.77). The pattern is below the 200 day MVA (14.95), converged with a down trendline connecting February and August highs. On a breakout aggressive players can look at taking positions ahead of a move over the 200 day MVA. Money flow looks good. Volume remained below average at 1.28 million (avg. 2 million). The company will broadcast its November sales release Thursday before the bell. Target: 18
BUY POINT: Breakout: 14.56 on volume of 2.7 million or better. Stop: 13.54 (7%).
POSITION: Stock and/or January $12.50 calls to buy (LTD AV). Delta unavailable.
http://www.investmenthouse.com/ct/ltd.html
PLCM (Polycom--$38.65; +3.21; optionable): Telecom
http://biz.yahoo.com/p/p/plcm.html
STATUS: Making a good move up in the handle to its year-long cup or saucer with handle pattern that is at the bottom of a larger base with highs near 70. Volume has been nicely below average in the handle until rising today to 2.25 million (avg. 3 million). The company today announce the acquisition of ASPI Digital. Showing great money flow and solid buying, we are looking for a breakout over the November (handle) high. Target: 48
BUY POINT: Breakout: 39.63 on volume of 4.5 million or higher. Stop: 36.86 (7%). A buy to 41.61 on breakout.
POSITION: Stock and/or January $35 calls to buy (QHD AG).
http://www.investmenthouse.com/ct/plcm.html
Back On:
PRGS (Progress Software--$17.42; +0.41; optionable): Software
http://biz.yahoo.com/p/p/prgs.html
STATUS: Previously covered in the lengthy rolling pattern, PRGS is now back up in the upper reaches near 18; the pattern is the floor of a larger base of 23 months and dates from mid-2000. The stock has been moving up nicely since mid-November, and after a 2-day pullback, Tuesday shot up again from the 10 day MVA with volume breaking above average (134,700; avg. 121,000). Looking for a breakout here on continued rising volume. Target: 22
BUY POINT: Over 17.80 (June high) on volume of 165,000 or higher. Stop: 16.65 (7% below a buy point at 17.90).
POSITION: Stock and/or January or March $15 calls to buy (RGQ AC or CC; 0 open interests)
http://www.investmenthouse.com/ct/prgs.html
Indexes: Updated after some good moves today.
SOX (Phili Semiconductor--$544.11; +33.11; optionable):
STATUS: The index made its move today, hitting our aggressive buy point at 537 on a strong move higher. It is now getting close to the 200 day MVA (at 561.50). Breakout from the ascending wedge-type pattern from since mid-November is over the high at 553.60, so we will look for a move over the resistance (562 range). Aggressive players can look at getting in for the ride from here, watching the approaching 200 day resistance.
BUY POINT: Riding positions taken at 537. Aggressive entry point from here: 545 in a continued rally. Breakout: 561.63 in a continued rally.
POSITION: Aggressive: December $530 or $540 calls to buy (SJX LF or LH). Breakout: December $550 or $560 calls to buy (SJX LJ or LL).
QQQ (Nasdaq 100--$40.83; +1.86; optionable):
STATUS: The index rallied up to its 200 day MVA (41.07) today on stronger volume (79 million; avg. 86 million). We will look at taking positions on a break over the MVA, which would constitute a breakout from the ascending wedge formed since mid-November. The index hit our aggressive buy point at 40.50. Target: 44
BUY POINT: Breakout over the 200 day MVA: 41.20 volume in the range of 114 million. Stop: 38.32 (7%).
POSITION: January $33 calls to buy (QQQ AG).
SUMMARY:
- Market was ready to rally, and it made the move today.
- Volume not massive, but solid increases and back above average
- A good rally given that there was 'nothing to be happy about' with Monday's action.
- Another call that semiconductor orders have bottomed while Cisco says sales are well in line with expectations and market share is surging.
- Team Trades
The consolidation gave way to the rally.
Monday night we said the Nasdaq and SOX were ready to take on the 200 day MVA once again. Today the Nasdaq started higher, tested resistance at 1930 three times, and then blew past that level with just over 2 hours to go. It cleared resistance at 1940 and then took out the 200 day MVA at 1949.45 (at today's close). The pressure had been building from below during the ascending wedge. Today it made the first important move, and the other indexes were ready to follow.
Volume was not huge, but it was up over the recent selling, pushing back above average on the Nasdaq and on the NYSE as well. Individual volumes were for the most part solid on the upside moves, but similar to the indexes, they were not what you would call powerful. It was a good move higher, but not a blowout confirmation of the breakout. We want to see volume continue to grow on the move higher toward the down trendlines.
Big mood swing on the street: from 'nothing to be happy about' to effusive.
Monday night you would have thought there had been no rally off of the bottom. The mood was negative after the indexes scored another loss. After the long bear, it does not take much to get the gloom up. It was not just the market commentators on television moping around, but option buyers turned to puts again Monday even as the indexes held above the up trendlines on much lower volume. That is great; if you are going to sell, let it hold support and be on lighter volume.
Despite what the market is saying, many, many analysts, strategists, and fund managers are pretty sure things are going to tank. Barton Biggs has been negative on the market for a long time. Back in August he was quite adamant that the market would not recover for a long time. After September 11 he was even more so. We read an article where he opined the bear market was not over and would last a long time into the future. He was at it again today, but stated that the September lows were most likely the primary bottom. However, he said it was 'madness' that the 'technology bubble' was being inflated again.
He was joined by others that voiced again that the market is just too inflated right now after the run off the bottom. Earnings cannot justify the prices, and they do not see the recovery in earnings. It is very much the 'show me' mentality many have adopted after getting the first real bear market in 25 years. It really makes us wonder how many of these are short the market and are, much as the Fed used to try, trying to talk it down so they don't get just slaughtered on their short positions.
Following their gut?
Barton Biggs has been a stalwart in investment circles for years. He has seen a lot as have many of the others that comment, both positive and negative. We have listened to many of these and read their articles. The most common theme is that valuations are too high based on the economy. As they do not see any economic recovery in the near future, they see valuations too high as they believe earnings cannot start rising to back them up soon.
Indeed, we heard one say that the market was projecting an early 2002 recovery and that is why it was rising now. That would be the nearest term the market would look, and that is pushing it. The market usually looks out 9 to 12 months; six months is really ahead of schedule.
While they are citing historic valuations in the argument that stocks are too richly priced right now, that is the bulk of their evidence for a market that is ahead of itself and is going to trend lower once again. This is a real general view that backs up their 'gut' feelings. It is not a look at what the market is saying right here and now.
We have said over and over again, we are not smart enough to probe the depths of the future, even though we read a lot of history and have been at this a long time. We prefer to look at the true gauge of the market: the market itself. It was telling us it was in trouble back in March 2000 with all of the distribution days and wild volatility that we noted time and again. It foretold the recession. Back in September it flashed classic bottoming signs and ever since has made a solid climb, moving higher, resting and consolidating those gains, and then moving higher again. It is now taking on the major resistance, and it is thus far handling it well. It may turn down and tank, but it will tell us when that is starting.
The point: your gut may tell you something; indeed, we get 'gut' feelings every once in awhile. I had a gut feeling about the move today when I wrote last night's report; I said it was ready to move. That gut feeling, however, was based on hard numbers, specifically the market itself in its price, price patterns, volume, sentiment indicators, and leading stocks. Sure this market may turn and tank in a month or two or three; it may reverse on us after trying to break over the final resistance. But, do we sit on the sidelines and not take advantage of the moves we see setting up on the belief that some day the market will fall again? You know that answer. Our motto is 'take what the market gives you,' and sitting buy and letting great moves pass you by when the market is telling you it is in good shape for now is not taking what is there for the taking. Indeed, we like the negative attitude of these guys. It keeps their money out of the market even as it rallies now. That money will provide future fuel to the rally when they finally start putting it to work.
In fairness we have a different view of the market than Biggs and the others, but our view is based on using the market to make money for the here and now as well as for the future. We want to get our cash flow where we need it to live as well as get those retirement accounts pumped up so we can take advantage of our definition of retirement: doing what we want to do when we do it. Those are our goals for you, and we are continuing to put together the package of services to achieve that. The SSR, TTR, Daily, Online Seminars and the Alert service are the foundation. Taking advantage of what they have to offer and getting in on the good moves builds the house on top of that foundation.
End Part 1 of 2
|
us stock market
stock option
|
