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Begin Part 2 of 2
THE PLAYS:
All prices are current as of the close of trading Monday.
Good movers and breakouts: ASE broke out in a super move, and RNBO made its move. Nice moves from the put plays (LE and IDTI). Some of the techs that have been pulling back are looking very nice here; see MXIM, VRTS, KLAC, BRCD, etc.
Best Plays:
1) NTAP: Up on rising volume.
2) EMLX: Ditto.
3) MUSE: Could bounce and move intraday.
4) MXIM: Wrapping up its pullback.
5) IBM: Ditto.
6) IBI: Testing the 18 day MVA on low volume.
7) VRTS: Looks good at support, and volume is low.
8) CHKP: Ditto.
9) KLAC: Another stock showing a 'shooting star' doji (bullish) on a pullback.
10) BRCD: Ditto.
NEW PLAYS:
Index:
SOX (Phili Semi--$559.37; -12.37; optionable):
STATUS: Back at the 200 day MVA off the recent highs (590.39, 590.34), pulling back for the third day and actually closing just below the support. If it can hang in the range of the 200 day, we will look for a strong move back up from there with a new (initial) target at the recent highs. If the index continues to slip below the 200 day MVA, next level of possible support is 550 (the 200 day is at 559.69), and if it holds there and a rally kicks off, good entry point.
BUY POINT: Aggressive: 560 on strong and rising volume in a rally.
POSITION: December $560 calls to buy (SJX LL).
NTAP (Network Appliance--$19.95 +0.92; optionable): Computer Hardware
http://biz.yahoo.com/p/n/ntap.html
STATUS: NTAP broke over its 200 day MVA (now at 16) earlier this month, ran to 19.93 and after a brief pullback (one day, that is), looks ready to take out that high. A look at a longer-term chart shows that NTAP's November pullback to the 50 day MVA was a handle to a 6-month saucer base; Friday's pullback was a quick test of that breakout. The stock had moved up for three days before making it over the buy point, so had had a good run even though it did not move that much higher than the buy point. We could get that better move here. Volume was rising to 12 million; avg. 10.8 million.
NTAP has excellent money flow. Target: 24
BUY POINT: 20 on volume of 16 million or higher. Stop: 18.60 (7%).
POSITION: Stock and/or January $17.50 calls to buy (NUL AW).
http://www.investmenthouse.com/cd/ntap.html
EMLX (Emulex--$38.43; +1.69; optionable): Computer Hardware
http://biz.yahoo.com/p/e/emlx.html
STATUS: EMLX has had a nice run after breaking out of a cup with handle (and moving back over its 200 day MVA) in late November. The stock today took out the last two day's intraday highs with volume rising to 10.6 million (avg. 8 million). Looks ready to head higher from here; the stock showed a pullback doji Friday, with volume dropping back slightly. That was enough of a breather to set up today's positive price/volume action. Target: 50
BUY POINT: 39 on continued rising volume. Stop: 36.27 (7%)
POSITION: Stock and/or January $35 calls to buy (UMQ AG). Deltas unavailable.
http://www.investmenthouse.com/cd/emlx.html
Some techs that are testing the good move up last week:
POWI (Power Integrations--$25.30; -0.55; optionable): Semiconductor
http://biz.yahoo.com/p/p/powi.html
STATUS: POWI is in a long saucer base at the bottom of a larger 23-month base, and after failing to break out of its recent handle, pulled back the last 2 days of the previous week. It continued that pullback today, closing with a shooting star doji just above the 10 day MVA (24.70) but not before trying to make a good move; the stock was up to 26.50 (it closed Friday at 25.85). Volume was higher and above average at 568,100 (avg. 505,000). We look for a hold and further consolidation here for the stock to re-try the move. Target: 35. Strong money flow and buying.
BUY POINT: Aggressive: 27 on continued rising volume in a rally. Breakout: 28.61 on volume of 758,000. Stop: 26.61 (7%).
POSITION: Stock and/or January $22.50 calls to buy (QPW AX).
http://www.investmenthouse.com/ct/powi.html
XLNX (Xilinx--$40.61; -0.39; optionable): Semiconductor
http://biz.yahoo.com/p/x/xlnx.html
STATUS: Testing the breakout move over its 200 day MVA (currently at 38.56) and continuing the pullback. We were looking for XLNX to test the 40 range, and today it did that but on rising and strong volume Monday (13 million; avg. 9 million). Showed another shooting star doji, however, and the company came out after the bell saying they see current quarter revenues higher than expected, and the stock was up slightly after hours. Could be the catalyst for another move up. December high is 43.25. Strong money flow. Target: 50
BUY POINT: Aggressive 41 on above average volume. Stop: 37.67 (7%). Breakout: Over 43.25 on strong volume in a rally (12 million). Stop: 40.22 (7%)
POSITION: Stock and/or January $35 calls to buy (XLQ AG).
http://www.investmenthouse.com/ct/xlnx.html
Moving average bounce play:
MUSE (Micromuse-$16.59; -0.76; optionable): Software
http://biz.yahoo.com/p/m/muse.html
STATUS: Moving up a couple of sessions, then pulling back to the short term moving averages over a few sessions. Today it continued the pullback toward the 18 day MVA, showing another doji with continued low volume (1.9 million; avg. 3.7 million). We are looking for a bounce from that moving average; there is always the chance MUSE can hold the 10 day MVA, above which it closed today (that support is at 16.40), but the stock closed nearer its low (16.33), so we may see that test of 16 as noted in the weekend report. Good buying. Target: 25, the 200 day MVA.
BUY POINT: Aggressive: 16.50 after a test of support at the 16 range. Stop: 15.34(7%)
Look for volume in the range of 3.8 million for the move.
POSITION: Stock and/or January $15 calls to buy (QUM AC).
http://www.investmenthouse.com/ct/muse.html
MCRS (Micros System--$24.65; -0.40; no options): Software
http://biz.yahoo.com/p/m/mcrs.html
STATUS: Made the move we wanted as the stock popped out of the handle Monday, but disappointingly pulled off the high (that nicely cleared the handle at 26.99) as volume continued falling back. It was still high at 110,600 (avg. 73,000). The stock closed with a doji above support of the 18 day MVA (24.52), so we will see if it can hold that for further consolidation and another try at a breakout. Lower support can emerge at 24, level of other price support from May, August and November. MCRS is in a cup with handle base of 13 weeks, and has strong money flow and buying. Target: 31
BUY POINT: 26.13 on volume of 110,000 or higher. Stop: 24.30 (7%)
POSITION: Stock.
http://www.investmenthouse.com/ct/mcrs.html
ASE (American Science--$23.50; +5.25; no options): Health Services
http://biz.yahoo.com/p/a/ase.html
STATUS: A super breakout from the ascending wedge (volume was strong at 264,700; avg. 90,000) and now is too far to chase (our limit for buying on the breakout was back down at 21.14). This was a really strong move and will most likely head higher; there is always the chance of a bit of immediate profit-taking, but very aggressive getting in here. We will look for a pullback to test near the range of the November high at 20.65 or higher (as it most likely won't pull all the way back given the strength of the move). Relative strength made the breakout too just as we want. Initial target is 25, but we will let it run if it will.
BUY POINT: After a pullback on lower volume to the 20.65 range.
POSITION: Stock.
http://www.investmenthouse.com/ct/ase.html
Some small stocks to look at:
RNBO (Rainbow Tech--$6.79; +0.44; optionable): Software
http://biz.yahoo.com/p/r/rnbo.html
STATUS: Popped out of the lateral movement of the last several days (test of the breakout over the 200 day MVA) just as we wanted, breaking resistance at the 6.50 range on strong volume of 550,900 (avg. 136,272). The stock remains a buy on the move up to 6.96 from here, though it reached 7.10 on the breakout today before pulling back. Look for a move back up with volume remaining strong and rising; support at the 6.50 range on a pullback.
Super money flow and buying. Target: 8
BUY POINT: Riding positions taken on the move over 6.50; a buy up to 6.96 on the breakout. On a move back up from the 6.50-6.60 range: 6.85 on continued strong volume.
POSITION: Stock and/or January $5 calls to buy (BQO AA).
http://www.investmenthouse.com/ct/rnbo.html
Short-term trade:
AUDC (Audiocodes--$4.59; +0.04; optionable): Scientific & Technical
http://biz.yahoo.com/p/a/audc.html
STATUS: Deep in a 15-month base. AUDC made a nice move up Friday on strong volume, looking ready to move out of a cup with handle-type base, but when it actually broke resistance today, hitting 5.08 on the intraday high, it pulled back to a tombstone doji on the close with the small gain (buy point was 4.60 for the aggressive play). Volume remained strong but was back down to 632,500 (avg. 380,318). Looks like AUDC may try to form a wedge or pennant here if it cannot mount another immediate move here and pulls back to test the 18 day MVA (4). New buy point is over today's high. The stock has solid money flow and good buying. Target: 6.40 (200 day MVA)
BUY POINT: Over 5.08 on rising volume (635,000 or higher). Stop: 4.74 (7%)
POSITION: Stock and or January $5 calls (ZRD AA).
http://www.investmenthouse.com/ct/audc.html
Back On:
MXIM (Maxim Integrated--$58.48; -0.83; optionable): Semiconductor
http://biz.yahoo.com/p/m/mxim.html
STATUS: Continued to test the breakout from its cup with handle, pulling back more and showing a shooting star doji (bullish) on the third day of pulling back. Volume continued to fall, down to 4 million today (avg.6 million). The stock may test the rest of the way to the 10 day MVA (57.22) or the November high at 56.95, but we look for a move back up from that range for a break over the December high (62.67). May be an intraday bounce and move up from the support. This recent pattern is part of a larger, 15-month base with highs near 88. Target: 75.
BUY POINT: Aggressive: 60 on rising volume in a rally. Stop: 55.80 (7%)
POSITION: Stock and/or January $55 calls to buy (XIQ AK).
http://www.investmenthouse.com/ct/mxim.html
Puts:
LE (Land's End--$44.11; -2.14; optionable): Retail
http://biz.yahoo.com/p/l/le.html
STATUS: Started the move down as we expected, dropping after opening at the 18 day MVA then breaking support at the 45 range on rising volume (561,700; avg. 270,000). We are looking for the move down to the 50 day MVA (41.89) and are riding positions taken on the buy point at 46. If the stock holds that level, we will assess its strength at that point to see if it may head even lower.
http://www.investmenthouse.com/ct/le.html
IDTI (Integrated Device Tech--$23.11; -2.64; optionable): Semiconductor
http://biz.yahoo.com/p/i/idti.html
STATUS: Hit the buy point as it continued its serious fall on Monday. IDTI broke the 50 day MVA (29.24) Friday on huge volume on news that third-quarter revenues would fall significantly below the previous quarter due to weak orders. Volume was lower but still very strong on the selling today at 6.56 million (average 2.74 million). Looking for a continued drop, although with such selling we could see a quick relief bounce, although we would not expect it to last. IDTI could reach as low at the October lows at 17.50.
BUY POINT: Aggressive: After a relief bounce to the 24 range, a drop back through 23.50 on continued strong volume.
POSITION: January $30 puts to buy (ITQ MF).
http://www.investmenthouse.com/ct/idti.html
CONTINUED PLAYS:
TEST OF BREAKOUT:
IBM ($119.66; -0.74; optionable): Computer Hardware
http://biz.yahoo.com/p/i/ibm.html
STATUS: Broke out on excellent volume last week from the 6.5-month cup with handle, and has rested the last three sessions. The rest has resulted in a nice-looking pullback, gradual and on steadily decreasing volume (5.57 million Monday; average 8.53 million). Today IBM showed a doji, comfortably over the recent high (117) and 10 day MVA (117.84). In a rally, we are looking for a move back over the breakout high (121.98). Upper channel line resistance still at 125. Target: 140
BUY POINT: Aggressive: On a move back up from here in a rally, looking for rising volume. Stop: 111.05 (7%). Breakout: Over 122 on volume of 9 million or higher. Stop: 113.46 (7%)
POSITION: Stock and/or January $115 calls to buy (IBM AC).
http://www.investmenthouse.com/ct/ibm.html
ORLY (O'Reilly Automotive--$35.31; -0.73; optionable): Auto Parts
http://biz.yahoo.com/p/o/orly.html
STATUS: Huge breakout last Wednesday, and but after gapping up and reversing it has made an orderly retreat on low volume. Today it dropped back through the July highs (35.50), but not by much, and it closed comfortably over its 10 day MVA (34.30) and its recent highs (34). Volume was also low on the selling (350,600; average 521,400), so we are still looking for ORLY to hold here and make a move back up in a rally. Look for a move back over the high on a sharp rise in volume. Super money flow and buying. Target: 41
BUY POINT: Aggressive: On a hold here, 36.60 on 525,000 volume or higher. Stop: 34.04 (7%). New high breakout: 37.47 on above average volume. Stop: 34.78 (7%)
POSITION: Stock and/or January $35 calls to buy (OQR AG; low open interests).
http://www.investmenthouse.com/ct/orly.html
MOVING AVERAGE BOUNCE PLAYS:
JAKK (Jakks Pacific--$20.86; -3.54; optionable): Toys & Games
http://biz.yahoo.com/p/j/jakk.html
STATUS: Received a downgrade and dropped hard out of its promising pattern. It caught the 50 day MVA (20.74) to close, but it clearly has a way to go to get back into buying position.
http://www.investmenthouse.com/ct/jakk.html
WEDGES, PENNANTS, and FLYING PLATEAUS (AND FLAGS): These are some of our favorite patterns as the moves can be explosive. In this market, however, we need to see the move on the breakout on strong volume.
BASING/TRADING RANGES:
SERO (Serologicals--$20.18; -0.91; optionable): Biotechnology
http://biz.yahoo.com/p/s/sero.html
STATUS: SERO broke out of a double bottom base in May before moving into this rather choppy cup with handle. Monday SERO tested all the way down to 19.30 at its low before recovering, closing below its 10 day MVA (20.28). More of a range than we have seen of late, and not what we like to see in a handle. Volume remained very low, in at 75,500 (average 247,300). Continuing to look for a breakout over the December high 22; previous high in the handle is from November (21.50). Excellent money flow and buying. Target: 27.
BUY POINT: 22.13 on volume of 381,000 or higher. Stop: 20.58 (7%).
POSITION: Stock and/or January $17.50 calls to buy (QEO AW; low open
interests).
http://www.investmenthouse.com/ct/sero.html
IBI (Intimate Brands--$14.01; -0.35; optionable): Apparel
http://biz.yahoo.com/p/i/ibi.html
STATUS: Still holding the pennant handle to the 19-week cup with handle base. The stock continued back Monday, dipping through the 200 day MVA (14.22) and holding the 18 day (the main support in the pattern, at 13.96) to close. Not a severe drop, with volume down again to 867,100 (average 1.24 million). Looking the hold here and the breakout over 14.78 (handle high from November). Excellent money flow. Target: 18.
BUY POINT: Breakout: 14.91 on volume of 1.6 million or higher. Stop: 13.87 (7%).
POSITION: Stock and/or January $10 calls to buy (IBI AB)
http://www.investmenthouse.com/ct/ibi.html
PHM (Pulte Homes--$41.49; -1.01; optionable): Materials & Construction
http://biz.yahoo.com/p/p/phm.html
STATUS: Nice breakout run from the ascending wedge (at the bottom of the 4.5-month cup, part of a larger 7-month base), and for the last few sessions PHM has pulled back a bit. Not a bad move, coming on lower volume that is generally below the average (today 504,200; average 552,900). Today PHM tapped down to its gap-up point from last Wednesday, holding over its 10 day MVA (40.35). We will see if the stock holds and continues to form its handle, or if it continues its move after this short rest. Last Wednesday's breakout high was 43.70. Target: 53 (perhaps forming another handle along the way).
BUY POINT: Breakout: 43.83 on volume of 800,000 or higher. Stop: 40.76 (7%).
POSITION: Stock and/or January $40 calls to buy (PHM AH). Delta unavailable.
http://www.investmenthouse.com/ct/phm.html
HD (Home Depot--$48.26; -1.15; optionable): Retail
http://biz.yahoo.com/p/h/hd.html
STATUS: After a great move up from the 50 day MVA (then 42.50, now 44.20), HD has dipped back a bit in a lateral consolidation over the last three sessions. Today HD dropped back a bit more, but held to close over its recent highs and 10 day MVA (47.55). Volume was again low on the selling, which is what we like, coming in at 5.4 million (average 8.56 million). It is forming a handle right below resistance at 50. This is the real breakout ahead if it can do it. Looks good in this pattern, with the recent breakout high at 50.40 in the range of its pre-September levels in the 50 range. Looking for a breakout over the high at 50.40. Target: 58
BUY POINT: Breakout: 50.53 on volume of 11.5 million or higher. Stop: 46.99 (7%)
POSITION: Stock and/or January $45 calls to buy (HD AI).
http://www.investmenthouse.com/ct/hd.html
VRTS (Veritas--$40.94; -0.52; optionable): Software.
http://biz.yahoo.com/p/v/vrts.html
STATUS: Back at support at the 10 day MVA (40.38). VRTS has pulled back on low volume after moving up in its wedging handle (to a cup with handle pattern of 22 weeks), looking good with a bullish 'shooting star' doji Monday. We will see if VRTS can get some more strength behind it on a move in a rally, looking ahead to the handle high (43.89) and then the 200 day MVA, potential resistance at 47.45. Target: 53
BUY POINT: Aggressive: 42.75 on rising volume near the average (14.8 million; today 8.28 million) in a rally. Breakout: 44.02 on volume of 22 million. Stop: 40.94 (7%)
POSITION: Stock and/or January $35 or $40 calls to buy (VIV AG or AH). Deltas unavailable.
http://www.investmenthouse.com/ct/vrts.html
CHKP (Check Point Software Tech--$40.25; +0.32; optionable): Security Software
http://biz.yahoo.com/p/c/chkp.html
STATUS: Appears to have caught support again at the 18 day MVA (38.89). CHKP has made a lower-volume pullback the last three sessions after running toward the breakout last week, today gapping back to the 18 day and then reaching up to a high of 41.35. Volume continued down at 5.5 million (average 9.63 million). Right back in the midst of its handle, with the breakout just over the handle high at 43. The 200 day MVA is at 45.86, so that can pose resistance unless we get a strong breakout. The target is 52 on a move over the 200 day MVA.
BUY POINT: Breakout: 43.13 on 14.2 million or higher volume. Stop: 40.08 (7%). Aggressive: In a Nasdaq rally, 41.50 on average or better volume. Stop: 38.56 (7%).
POSITION: Stock and/or January $35 calls to buy (KEQ AG).
http://www.investmenthouse.com/ct/chkp.html
KLAC (Kla-Tencor--$54.86; -0.44; optionable): Semiconductor
http://biz.yahoo.com/p/k/klac.html
STATUS: Looking good, having made a breakout move last week but pulling back off of its down trendline (connecting September 2000 and May-August 2001 highs, currently at 56.50). The pullback was healthy, coming on decreasing volume (down to 6.8 million today; average 9.45 million) and today showing a 'shooting star' doji over the support of its recent high and August tops (with the 10 day MVA, at 53.38). The move today tapped up to the trendline again, and in a rally we are looking for KLAC to blast through that level and the last week's high (57.60). We are not waiting for that to happen in a rally, but are ready to jump on a play on a strong move up from here. Target: 69
BUY POINT: In a Nasdaq rally, a move over 55.50 on average or better volume. Stop: 51.61 (7%). We can also look at positions on a move over the high, with the buy point of 57.73 with above average volume. Stop: 53.69 (7%).
POSITION: Stock and/or January $50 calls to buy (KCQ AJ).
http://www.investmenthouse.com/ct/klac.html
Updating this covered call play:
BRCD (Brocade--$37.45; -0.65; optionable): Computer Peripherals
http://biz.yahoo.com/p/b/brcd.html
STATUS: BRCD is looking nice, having pulled back the last two sessions on decreased, below average volume (16.5 million; average 17.3 million). Today it gapped back a bit and showed another doji, this one a bullish 'shooting star' (yet another one). Very stingy with its gains, not pulling back to the extent we would want with a covered call play. In fact, it is well above support from its 10 day MVA (35) and the recent high (33.92), and from this bullish pattern we could be getting a run back up with the market, requiring open covered call positions to be closed. For new positions we can jump aboard on a move up with a market rally from here. Target: 43.
BUY POINT: In a rally, perhaps after a bit of a test down to 37, a move over 38 on increased volume. Stop: 35.34 (7%). Over breakout high: 39.33 on above average volume. Stop: (36.58).
POSITION: Stock and/or January $35 calls to buy (UBF AF).
http://www.investmenthouse.com/ct/brcd.html
Good Investing!
Jon L. Johnson and your Technical Traders Report Team
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 in 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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