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12/05/01 Stock Split Report Market Summary
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Stock Split Report Subscribers:

MARKET ALERT SERVICE

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http://www.investmenthouse.com/alertssr.htm

PLAYS TO LOOK AT: Wow - what a day! Excellent breakouts and moves all over the report make things exciting, not to mention lucrative! Our Continuing Candidate best play AZO had an incredible day, closing up over $12 on the day after announcing its earnings. Other report favorites breaking out include Pre-Announcements IGT, BMS, THQI, GTK, DHR and SCRL; Former Splits LUV and FIC; Post-Split PDLI; and Market Favorites CSCO, EMLX, AMD, as well as nearly every other Market Favorite we have recently featured (NVDA, QLGC, PMCS, others).

After the run we have enjoyed over the past few sessions, we are now focusing on those plays that 1) still have room to run before hitting potential resistance, and 2) are making breakouts. Given how far the markets have recently run, we are being very careful with opening new option positions as the indexes are reaching toward resistance.

BONUS PLAYS:

WEDC (White Electronic Designs--$6.20; +0.52; no options): Semiconductor.
http://biz.yahoo.com/p/w/wedc.html
STATUS: Moving up off of the 50 day MVA (5.47), forming a double bottom. Today's move was on decent volume (83,700; average 76,300), but we like the support here and the sharp bounces. WEDC reached over the pattern center (6.25) at its high of 6.35, pulling back to close. Looking for more strength on a continued move up, looking toward the left-side high at 7.45. Good money flow and buying.
BUY POINT: 6.47 on volume of 100,000. Stop: 6.02 (7%).
POSITION: Stock.

SZA (Suiza Foods--$59.97; -0.11; no options): Semiconductor.
http://biz.yahoo.com/p/w/wedc.html
STATUS: SZA had been steadily bouncing along its 50 day MVA (58.89), but dropped through that level to below 56 in November, but recovered nicely to push back over that level and form a two-month cup. It has dipped back to form a handle the past week, volume dropping the last couple of sessions, showing a 'shooting star' doji today over its short-term MVA's (10 day at 59.59) and 50 day on volume of 334,400 (average 385,000). The aggressive can play a strong bounce from here, with the handle high for a breakout at 61.25. Target: 70 (high at 64.73).
BUY POINT: Breakout: 61.37 on volume of 575,000. Stop: 58. Aggressive: 60.75 on above average volume. Stop: 58.
POSITION: Stock and/or March $55 or $60 calls to buy (SZA CK - low open interest - or SZA CL).

PRE-ANNOUNCEMENTS: Still looking at IGT for Wednesday. Also watching EDS and SRCL for continued momentum.

IGT ($64.70; +2.08): Did not get an announcement today, but we are still looking for one tomorrow with a board meeting. Nonetheless, IGT broke out today! It had been moving in handle to a jagged cup, and this move started last week from the 18 day MVA (60.53), and took off today as volume shot up to 1.53 million (average 1.19 million). IGT is still a buy up to 66.93 (today's high 65.37) on continued strong volume with stock and/or January $60 calls to buy (IGT AL), and we could get another pop with an announcement.

TRDO ($29.71; +3.46): Forecast to announce a split in the beginning of December (waiting any day) in conjunction with a board meeting. Wow - what a recovery! TRDO took off today, clearing resistance of the short-term and 50 day MVA's (18 day at 27.37) on sharply increased volume of 695,000 (average 318,400), and hitting an intraday high of 29.87. We may see some quick profit taking, but we are looking for this momentum to continue, watching the recent high (33.79) as the target. On a move over 30 with continued strong volume we can look at additional positions with stock and/or February $25 calls to buy (UNC BE). Stop: 27.90 (7%)

DHR ($62.53; +2.94): Forecast to announce a split in late January in conjunction with earnings. Another great breakout! DHR bounced up from the 50 day MVA (57.28) Tuesday, and continued up today to clear the recent highs (61), a long-term down trendline (62) and our buy point as volume increased sharply to 2.13 million (average 1.31 million). Looking for the upward momentum to continue for existing positions, but given the strength of the moves we could see some profit taking, which we will watch as a test of the 62 level and then a move back up. DHR is still a buy up to 65 on continued strong volume. From here or after a brief test, on a move over the intraday high 62.75 we can look at stock and/or January $60 calls to buy (DHR AL).

SONC ($33.60; +0.88): We are working on a date. Terrific move today! Most recently SONC has been holding over the 50 day MVA (32.10) and bouncing up against resistance at the short-term MVA's (32.81) on generally low volume. SONC got the strength it needed to clear that resistance today, as volume shot up to 594,800 (average 248,600) and pushed the stock up to close in range of the prior closing highs (just under 34). Looking for this upward momentum to continue, and on a move over 33.92 with continued strong volume, we can look at additional positions with stock and/or March $30 calls to buy (ZSQ CF - March $30). Stop: 31.75.

FORMER SPLITS: FIC also made a great move today, so we are watching for a pullback for additional positions.

LUV ($19.40; +0.56): Broke out today, and showed a decent gain, but the volume, although higher at 3.87 million, was lighter than what we were looking for (average 4.2 million and we wanted 6 million). So from here, we will watch out for a pullback, but also a possible move up (a buy up to 19.95) on increased volume. If we get the stronger move, we can look at additional long-term positions, with stock. Stop: 17.76-18.55 (7%).

PRE-SPLITS: Keeping an eye on LYTS for showing good strength on today's recovery.

CBH ($78.56; +2.50): Splits 2:1 effective 12-19-01. Made a new high today! CBH broke out today, clearing the left side highs of the cup and closing at a new all-time high as volume increased to 163,500 (average 148,900). Nice volume increase but was it still lighter than we want to see on a breakout (looking for 230,000), but we know that pre-splits can sometimes take off irrespective of volume. Watching existing positions with care, but if we see strength on a move (the volume we were looking for), CBH is still a buy up to 80.66 with stock and/or January (very low open interest currently) or March $70 calls to buy (CBH AN or CBH CN).

KIM ($50.66; +0.66): Splits 3:2 effective 12-24-01. Broke from the ascending wedge today, as volume increased to 265,600 (average 164,700). Great strength on the move, but the stock still pulled well off the intraday high of 51.10 to close, so we will see if the upward momentum resumes tomorrow, or if we get some quick profit taking. If we get a pullback, we want to see support to hold over the former pattern highs (50.20). From here, we are looking for continued strong volume carry a continued move, and it is still technically a buy up to 52.71. Stock and/or January $45 calls to buy (KIM ).

CONTINUING CANDIDATES: Excellent showing from AZO today! For additional AZO positions we will look for controlled profit taking to hold support. APPB also showed some strength today - a healthy pullback there may provide a new opportunity to get in.

POST-SPLITS: Also looking at MIKE for more strength on continued momentum.

PDLI ($39.56; +2.52): Drugs - Biotech. Split 2:1 effective October 12. It moved! PDLI bounced up from the 10 day MVA (37.41) today and cleared the recent highs as it broke from its jagged handle (to a double bottom) on huge volume of 6.34 million (average 2.25 million). It pulled off the intraday high (40.36) to close, but we will see if we get more strength on a move, riding toward our target of 45. Still a buy up to 41.50 with stock and/or February $32.50 calls to buy (PQI BZ - remember, care with opening new options positions now), but remember that we are watching the market, and we will be ready for a pullback when it hits resistance and shows a pullback.

MARKET FAVORITES: Great moves by our recent bonus plays! Because they all either broke out or made big moves up from the bottom of their patterns, we are looking at an example tonight of a possible strategy other than merely taking profits - selling covered calls in order to hold onto the stock and make money as we ride it back to support and prepare for the next leg of the run.

PMCS (Pmc-Sierra--$27.38; +2.84; optionable: Semiconductor
http://biz.yahoo.com/p/p/pmcs.html
STATUS: After a solid move Tuesday, PMCS broke out and kept going in the rally today. Volume was up and strong at 15.2 million (average 10.9 million) on the move out of its cup with handle. We are targeting the 200 day MVA (28.78), and with the market also looking forward to some resistance we could see a pullback from there. Besides taking profits, we can sell calls to make money on the retreat and hang onto the stock for the next run. We could sell the December $25 calls (currently 3.30, would be about 4.30 at the target), and buy them back if the stock catches support around the 25 mark, netting about 11% on the drop and continue holding the stock as it moves back up. For long term holds in a bull market, this is what we love to do.
BUY POINT: Riding positions toward the resistance at 28.78.
POSITION: On a drop back from resistance, December $25 calls to sell (SQL LE). We would look at buying them back upon catching support.

SUMMARY:
- Powerful follow through to Tuesday's breakout move.
- Patience pays off big.
- DRAM prices up another 20% overnight as NAPM Services is, as anticipated, back over 50.
- How much further on this run?
- Subscriber Questions
- Team Trades

The volume rolls in.

The missing ingredient Tuesday was volume. Volume was not a problem today. The indexes powered higher on massive volume. Indeed, Nasdaq volume was the highest in this rally from the September bottom (and one of the highest of the year), and NYSE volume was no slouch, logging its biggest day since the September 21 reversal session. It was buying volume that was seriously needed, and investors came through.

A powerful move, and it is almost fitting that it came on the fifth anniversary of Alan Greenspan's 'irrational exuberance' statement that kicked off his attack on the stock market (though he denies this) that ultimately led to its crash along with the economy. The economy was hit by 'friendly fire' in his assault on the stock market and investors who, according to Greenspan and his crew, just did not understand the dangers of the market. Investors understood the market, they simply did not understand how a group of men could take it upon themselves to sink it supposedly to prevent something that was nowhere to be found, i.e., inflation.

In any event, buyers have crowded the market across the board the past two sessions, buying up everything they could get their hands on. That move over the 200 day MVA and above the down trendline on the S&P 500 turned more shorts into longs, and pulled more and more money into the market on the buy side. With this two-day explosion, now we have to worry about how far this will run. More on that later.

Patience is the key.

We know some were getting a bit frustrated at our saying 'be patient and wait for the move' tone the past week. It is tough to do. You tend to want to jump the gun. Sure things looked right, but with the indexes right at resistance, you don't know until you see the move start. I remember sitting in church as a teenager and the sermon was about patience. Patience and teens do not mix. Anyway, the main idea of the sermon was that you had to pray for patience. Of course, when I tried it later myself, it turned from 'please give me patience' to 'I want patience and I want it now!'

Patience and investing are a hard mix, but it is absolutely essential in order to be successful. Don't get those 'happy feet' in the pocket that a young quarterback gets. Hang in there with your game plan and it often works just as you envisioned it. The rally over the last two sessions was setting up, and we saw it kick off Tuesday. It was time to buy as was today. The moves have been huge. The SOX and QQQ options plays have been big winners.

It is amazing how you can pack a quarter's worth of returns in a couple of sessions, and then continue to ride the longer term positions to even greater gains. That has been the way all during this rally: patience to wait and then get in at the right times and let the moves carry you higher. We were reviewing some alerts sent out over the last couple of months, and we picked up BRCM at 24, QLGC at 24.50, GNSS at 32, PLCM at 28.13, AZO at 44, LOW at 35, TERN at 7.68. These were buys that just kept on moving up. We added to these positions later when they opportunity came on pullbacks, but they have just been steady performers all rally. Big short term gains on options, big longer term gains on stock positions that we keep on holding. Patience to wait and get in when the market says to do so, and then patience to let the plays work for you. When the market is telling you things are okay, let it work for you.

THE ECONOMY

There is a new trend that was showing itself back in August: economic news getting better and companies starting to say things were getting better. September 11 made everyone skeptical, but both the economic news and company news has rebounded right back.

Primary example today: NAPM services jumped up to 51.3, right back above 50 as it was in August. It dipped in September and October, but it powered right back up as we anticipated it would. It was expected at a wimpy 43, up from October's 40.6, but hardly exciting. Instead the news today generated excitement and though the market was already rallying, it added a lot of fuel to the fire.

There was also good technology news as DRAM chip prices once again rallied sharply overnight, rising 20%. Once again that had the semiconductor sector with buyers at the gates. More good economic news.

Now people are waiting for Intel's mid-quarter conference call tomorrow as well as what GE has to say. They want the ball to keep rolling with more news of double digit growth in 2002.

End Part 1 of 2

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