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Begin Part 2 of 2
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
12-18-01
Housing Starts, November (8:30): 1.525M versus 1.552M prior.
Building Permits, November (8:30): 1.470M versus 1.473M prior.
12-19-01
Trade Balance, October (8:30): -$27.5B versus -$18.7B prior.
Leading Indicators, November (10:00): 0.2% versus 0.3% prior.
12-20-01
Initial Claims, 12/15/01 (8:30): 394K versus 394K prior.
Philadelphia Fed, December (12.00): -17.5 versus -20.2 prior.
Treasury Budget, November (2:00): -$47.5B versus -$23.7B prior.
12-21-01
Personal Spending, November (8:29): -0.5% versus 2.9% prior.
Personal Income, November (8:30): 0.0% versus 0.0% prior.
GDP - Final, Q3 (8:30): -1.1% versus -1.1% prior.
Chain Deflator - Final (8:30): 2.1% versus 2.1% prior.
Mich Sentiment - Rev., December (9:45): 85.7 versus 85.8 prior.
SUBSCRIBER QUESTIONS
Q: Why are 'negative views by option players a positive for the market?'
A: That was a line taken from Wednesday's market summary. To be more precise, it should have read 'negative views by options players as a whole are a positive for the market.' The reason is that options players as a whole are speculators. In other words, they buy out of the money near term (current month) options hoping to hit the home run. These are the most heavily traded options and they are thus the most volatile. The majority of option players are not investing, just trying to make a big score. Because they are speculators, they tend to load up on more options when they feel the market is certain to head in a specific direction. Problem is, just as with most areas of the market, speculators tend to get in late on moves; historically, when the put/call ratio closes above 1.0 (fear and anxiety) or below 0.4 (complacency), the market has been either ready to turn back up or topping. Thus, when option players get pessimistic about the market, that is a signal that things are either ready to change for selling to buying or a rally still has some legs under it. It is just a signal, however, as the put/call ratio is a secondary indicator to price and volume.
TEAM TRADES
We were looking for some downside plays Friday, but with the late rally, they did not put a lot of money in the pocket. Still, plays such as the OEX and C still look to have some downside left.
C (TTR) was a stock that broke below its 50 and 200 day MVA Thursday, and we were looking for more downside action from this stock that had set up a head and shoulders/descending wedge pattern. It was on its way down early, so we did not waste any time getting in on it as our plan Friday was to take downside positions quick to catch a move down Friday and Monday. C was obliging, hitting our buy point in the first half hour. We were looking at the January 50 calls with their good volume; they were trading at 3.70 by 3.80 to 3.70 by 3.90 on different markets. We put in a limit order at 3.80. It sat there for a minute and with the stock still falling we thought we were missed. Turned out we were filled on 10 contracts out of 15 ordered, and that was the delay in getting confirmation. Well, C continued to fall down, hitting 46 on the low on that first drop. We were looking for a target of 44 as our first support point. C turned up and rallied to 46.40, but then started to fall again. Great; it did not make it back to where we bought in and was stalling again. It worked its way down to 46 again over the next three hours. Problem is, it found support there again and then rallied sharply back up to almost 47 before it fell off slightly at the close. The options closed at 3.90 by 4.00. Not a stellar gain for the session, and not as far ahead as we wanted to be on Friday when we wanted to sell on Monday. It still closed below the 50 and 200 day MVA, so we will watch for perhaps a test of those levels Monday, and then some more selling down to our target.
THE PLAYS:
Best Plays:
1) TUNE: Huge volume and ready to break some resistance to a new high.
2) NBIX: Looks ready to break to a new high.
3) ULGX: Bouncing from the 200 day on strong volume.
4) COHU: A move up in the handle.
5) ESST: Strong breakout.
6) SANM: Tight doji, low volume, and support.
7) DCTM: Broke support on strong volume. Put.
8) ORLY: Looks ready to move higher in its test of the breakout.
9) EMLX: A high volume doji.
10) SERO: Still looks good in the handle.
11) HD: Ready to break out.
NEW PLAYS:
New:
TUNE (Microtune--$24.00; +0.55; optionable): Consumer Durables
http://biz.yahoo.com/p/t/tune.html
STATUS: The stock was up Friday on huge volume, trying to break to a new high after testing the recent breakout from a 5-month v-bottomed base. The company announced a secondary public offering of stock on the 10th, then announced pricing Friday. Volume was through the roof at 5.1 million (avg. 933,000) and we are looking for that to blast TUNE over the recent highs (24.42 and the December high 25.69). TUNE first tested the 18 day MVA Monday, then the higher 10 day MVA on Thursday. Money flow and buying are huge. This stock is off the lows (below 10) in a 16-month base. Target: 30
BUY POINT: Aggressive: 24.50 on continued strong volume. Stop: 22.79 (7%).
POSITION: Stock and/or April $20 calls to buy (TUF DD).
http://www.investmenthouse.com/ct/tune.html
NBIX (Neurocrine Biosciences--$49.55; +3.50; optionable): Health Services
http://biz.yahoo.com/p/n/nbix.html
STATUS: Broke out of a long double bottom-type base in late November, fell back to test the 18 day MVA twice and Friday lunged up from just under that support (from a Thursday doji) on strong volume of 1.6 million (avg. 479,000). Volume has been building for over a week, and based on Friday's strong-looking move, we expect NBIX to break over the December high 50.59 for another nice run. It is showing super money flow and buying, with relative strength starting to break out. Target: 58
BUY POINT: Aggressive: 49.75 on continued rising and strong volume. Stop: 46.27 (7%).
POSITION: Stock and/or February $45 calls to buy (UOT BI).
http://www.investmenthouse.com/ct/nbix.html
ULGX (Urologix--$19.75; +0.80; optionable): Health Services
http://biz.yahoo.com/p/u/ulgx.html
STATUS: Broke out over the 200 day MVA (from a descending lateral pattern) earlier this month and after hitting the December high at 21.25 pulled back to test that major support level again. From there on Friday the stock bounced back up, accompanied by strong volume (575,700; avg. 126,409). We are looking for a continued move up based on the strong volume spike, for a run to the first target at 26, the highs at the start of the 7-month cup base ULGX is carving out. Money flow and buying look good.
BUY POINT: Aggressive: 20.40 on continued rising volume. Stop: 18.97 (7%).
POSITION: Stock and/or April $17.50 calls to buy (OZU DW).
http://www.investmenthouse.com/ct/ulgx.html
COHU (Cohu Inc--$20.50; +0.65; optionable): Semiconductor
http://biz.yahoo.com/p/c/cohu.html
STATUS: A cup with handle base of almost 6 months, part of a larger 22-month base. COHU found support the last 2 days at the base of the handle at its 18 day MVA (19.82), from where the stock moved Friday on strong and rising volume (80,800; avg. 75,000). We are watching for a continued move up in the handle and breakout over 21.93 for the breakout. Aggressive players can look at getting in at a lower price if the price/volume action continues to look good. Strong money flow and buying. Target: 26
BUY POINT: Aggressive: Over 20.60 on continued strong volume. Stop: 19.16 (7%). Breakout: 22.06 on volume of 113,000 or higher. Stop: 20.52 (7%).
POSITION: Stock and/or February $17.50 calls to buy (QCH BW).
http://www.investmenthouse.com/ct/cohu.html
ORBK (Orbotech--$29.01; -0.98; optionable): Diversified Electronics
http://biz.yahoo.com/p/o/orbk.html
STATUS: Broke out over its 200 day MVA earlier this month and moved higher up in the right side of a 7-month base (high at 40.39 and part of a larger base of 22 months). The stock moved to 32.30, but by Friday was back down after some selling, testing the 200 day and the 18 day MVAs that are converged at the 28.50 range. It is also holding above the breakout point (27.28) in the descending lateral pattern that launched the recent breakout. We look for ORBK to hold this strong-looking support for a move back up. The 200 day MVA (EMA) is at 30, for potential resistance on the move up. High money flow, pulling back down last week but can move back up as the stock rises. Target: 37
BUY POINT: Aggressive: 29.60 on rising volume (Friday at 358,900; avg. 256,227). Stop: 27.53 (7%).
POSITION: Stock and/or April $25 calls to buy (OKQ DE).
http://www.investmenthouse.com/ct/orbk.html
ESST (Ess Tech--$23.08; +2.88; optionable): Semiconductor
http://biz.yahoo.com/p/e/esst.html
STATUS: Broke out over the December high (22.45) on strong volume. The stock broke out from a cup base in mid-November and after testing below the buy point, lunged up rom the 18 day MVA later that month, and is making a similar move here. ESST dropped back close to the support on Thursday, showing a tight doji on lower volume, then vaulted up Friday (volume was up to 1.4 million; avg. 660,000). Looking for a continued move here. Money flow and buying look very good. Target: 29
BUY POINT: Aggressive: 23.15 on continued strong volume. Stop: 21.53 (7%)
POSITION: Stock and/or April $20 calls to buy (SEZ DD).
http://www.investmenthouse.com/ct/esst.html
SANM (Sanmina--$22.30; +0.31; optionable): Electronics
http://biz.yahoo.com/p/s/sanm.html
STATUS: Broke over the 200 day MVA (22.09) on good volume over a week ago, and now is testing that move (breakout high was 25.65). The stock made a hefty drop Thursday but caught support at the 200 day (reinforced by the 18 day MVA, 21.87). We like the decreasing volume (down Friday to 10.8 million; avg. 9.6 million) and the hold at support with the tight hammer doji. Looking for a move up. SANM shows high money flow and solid buying. Target: 29
BUY POINT: Aggressive: 22.95 (over the 10 day MVA, 22.88) on rising volume. Stop: 21.34 (7%)
POSITION: Stock and/or April $20 calls to buy (SQN DO).
http://www.investmenthouse.com/ct/sanm.html
ALOY (Alloy Online--$17.64; +0.71; optionable): Internet Software
http://biz.yahoo.com/p/a/aloy.html
STATUS: Testing the breakout from a 3.5-month base (within a 23-month base) and appears to have found support at the 18 day MVA (16.82). Volume is still high, but relatively lower than it was on the breakout run (down Friday to 755,400; avg. 438,000). The stock bounced from that support, and we are anticipating a hold above the 17.25 range, just above the level of some August price support. On that move, look for a strong move back up with volume rising (breakout high is 19.55). ALOY shows excellent money flow and buying. Target: 22
BUY POINT: Aggressive: 18.25 on rising volume. Stop: 16.97 (7%)
POSITION: Stock and/or February $15 calls to buy (YLQ BC).
http://www.investmenthouse.com/ct/aloy.html
Puts:
DCTM (Documentum--$16.00; -0.73; optionable): Software
http://biz.yahoo.com/p/d/dctm.html
STATUS: Has been falling in a downtrend since early this month, and volume really broke out strong Friday as the stock fell through its 50 day MVA (16.71). We are looking for a move down to 12 for an initial target. The 200 day MVA is at 14 for potential support. Volume was 1 million; average 627,000.
BUY POINT: 15.65 on continued selling.
POSITION: January $20 puts to buy (QDC MX).
http://www.investmenthouse.com/ct/dctm.html
MANH (Manhattan Assoc--$27.41; -2.28; optionable): Software
http://biz.yahoo.com/p/m/manh.html
STATUS: Dropped to the 200 day MVA (27) on strong volume and is threatening to break the support. On that move MANH can fall to 22.50 to 20, our target. The stock broke through its 50 day MVA on a gap lower Friday morning, with volume rising by the end of trading to 950,200 (avg. 564,000). That was a sharp rise from that of the previous day (and throughout the week).
BUY POINT: 26.90 on continued rising volume.
POSITION: January $35 puts to buy (MQR MG).
http://www.investmenthouse.com/ct/manh.html
SPC (Saint Paul Companies--$45.00; +1.40; optionable): Insurance
http://biz.yahoo.com/p/s/spc.html
STATUS: Tanked below its 200 day MVA (45.76) on Thursday, then with volume falling bounced back up from the 44 range next day. The stock will try a move back over the broken support, but if it fails and heads back down, that is the "kiss good-bye" and a cue to look at taking downside positions. On that move, our target will be, initially, 40. Volume still strong though down Friday to 4.4 million (avg. 1.7 million). Analysts on Thursday were predicting higher losses in fiscal year 2001 due to scaling back the company's business operations.
BUY POINT: Aggressive: Below 45 on rising volume.
POSITION: January $55 puts to buy (SPC MK).
http://www.investmenthouse.com/ct/spc.html
CONTINUED PLAYS:
TEST OF BREAKOUT:
IBM ($121.10; +0.85; optionable): Computer Hardware
http://biz.yahoo.com/p/i/ibm.html
STATUS: Still testing the breakout from its cup with handle of 7 months (part of a larger 16-month base) and likely forming a handle to that larger base. Indeed, volume has dropped back below average for the last week, and if IBM continues to consolidate in the test we look for volume to drop further (it was down Friday to 7 million; avg. 8.8 million). IBM showed a doji Friday, appearing ready to hold current support at 120. December high is 123.21, the upper channel line (potential resistance) at 125. Strong money flow and high relative strength. Target: 147
BUY POINT: Aggressive: 121.60 on rising volume in a rally. Breakout: 123.34 on volume in range of 12 million. Stop: 114.70 (7%).
POSITION: Stock and/or January $115 calls to buy (IBM DC).
http://www.investmenthouse.com/ct/ibm.html
ORLY (O'Reilly Automotive--$35.45; +0.55; optionable): Auto Parts
http://biz.yahoo.com/p/o/orly.html
STATUS: Testing the breakout from a cup with handle and Friday made a move up from the 10 day MVA (34.63) on strong volume (634,000; avg. 540,227). We are looking for a continued move up and break over the December high at 37.35. Excellent money flow and buying. Target: 41.
BUY POINT: Aggressive: 35.75 on continued rising volume. Stop: 33.25 (7%).
POSITION: Stock and/or February $30 or $35 calls to buy (OQR BF or BG).
http://www.investmenthouse.com/ct/orly.html
XLNX (Xilinx--$40.08; +0.95; optionable): Semiconductor
http://biz.yahoo.com/p/x/xlnx.html
STATUS: Still testing the breakout move when the stock moved back over its 200 day MVA over a week ago. XLNX broke down on some selling Thursday and tested the 18 day MVA and the 200 day MVA, passing through the 200 day MVA (EMA) on the way. Volume was still below average, a good sign in the test, though price bounced slightly, tapping the upper support level it had just broken. At any rate, we are looking for a strong move back up in a chip rally, looking for XLNX to move over the series of recently-tapped highs near 43-43.25. Very strong money flow, and high relative strength (ahead of price). Target: 50. 50 day MVA is at 36.04.
BUY POINT: Aggressive: 40.50 on rising volume in a rally. Stop: 37.67 (7%). Breakout: Over 43.25 on strong volume in a rally (12 million). Stop: 40.22 (7%)
POSITION: Stock and/or March $35 calls to buy (XLQ CG).
http://www.investmenthouse.com/ct/xlnx.html
MOVING AVERAGE BOUNCE PLAYS:
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:
EMLX (Emulex--$37.75; +0.22; optionable): Computer Hardware
http://biz.yahoo.com/p/e/emlx.html
STATUS: Pulling back in a handle to the 7-month saucer with handle, showing a doji Friday just above its 10 day MVA (36.68). The stock hit the aggressive buy point of 38 but pulled back by day's end. Volume was high, spiking up and over the average (10.6 million; avg. 8.6 million), and EMLX is holding above other potential support from earlier December, at the level of the 10 day. Looking for a move back up and over the December high at 40.81 for the breakout. Strong money flow and relative strength ahead of price. Target: 50
BUY POINT: Riding aggressive positions taken at 38. Breakout: 40.94 on volume of 13 million or higher. Stop: 38.07 (7%)
POSITION: Stock and/or April $30 calls to buy (UMQ DF).
http://www.investmenthouse.com/ct/emlx.html
SERO (Serologicals--$20.51; +0.46; optionable): Biotechnology
http://biz.yahoo.com/p/s/sero.html
STATUS: Holding the handle to its 6.5-month cup base, volume low and price supported by the 18 day MVA (19.83). We are looking for a breakout over the December high at 22, an errant high; previous handle high was from November (21.50). Volume was up Friday with the stock making a small move from support at the 10 day MVA at 20.25 (volume 107,300; avg. 248,000). 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 February $17.50 calls to buy (QEO BW; low open interests).
http://www.investmenthouse.com/ct/sero.html
HD (Home Depot--$49.81; +1.81; optionable): Retail
http://biz.yahoo.com/p/h/hd.html
STATUS: Made a nice move up in the handle to its 7-month cup-type base as volume shot above average to 9 million (avg. 8.6 million). HD is just under the buy point at a level of potentially tough resistance at the 50 range. Money flow looks good and relative strength is breaking out, so we will see if the stock can break through. Target: 61
BUY POINT: Breakout: 50.53 on volume of 13 million or higher. Stop: 46.99 (7%)
POSITION: Stock and/or February $45 calls to buy (HD BI).
http://www.investmenthouse.com/ct/hd.html
VRTS (Veritas--$43.95; +0.12; optionable): Software.
http://biz.yahoo.com/p/v/vrts.html
STATUS: VRTS made a move out of the ascending wedge-type handle (to its 4-month cup, buy point 44.11) but the 200 day MVA halted the move and the rest of the week the stock pulled back with dojis and a move back below the buy point. Volume decreased both days, falling by Friday to 10 million (avg. 15.5 million). We are looking for VRTS to hold support at the 10 day MVA (42.26) or perhaps test the 18 day MVA if the market does not make a quick upside move. It will continue to squeeze between the upper 200 day MVA (47) and the lower support levels so we are watching it for a strong move over the resistance after this test. The 200 day MVA (EMA) is at 50. Target: 56
BUY POINT: Over 47 on strong volume (16 million+) in a rally. Stop: 43.80 (7%)
POSITION: Stock and/or February $40 calls to buy (VIV BH).
http://www.investmenthouse.com/ct/vrts.html
CHKP (Check Point Software Tech--$40.81; -1.31; optionable): Security Software
http://biz.yahoo.com/p/c/chkp.html
STATUS: Still holding the ascending wedge-type pattern that formed above the 18 day MVA and below the 200 day MVA (45.11), and is functioning as a handle to the stock's 4.5-month cup with handle pattern. Not the best handle, but as long as CHKP holds the current support (39.89), we want to be around when it makes a good move. The market will have to set the stage. Volume was back down with stock price, at 6.2 million (avg. 10 million). Target: 53
BUY POINT: Aggressive breakout: 44.08 on volume of 13.5 million or higher. Stop: 41 (7%). Over the 200 day MVA: 45.25 on similar volume. Stop: 42.08 (7%)
POSITION: Stock and/or April $40 calls to buy (KEQ BH).
http://www.investmenthouse.com/ct/chkp.html
KLAC (Kla-Tencor--$52.85; +0.81; optionable): Semiconductor
http://biz.yahoo.com/p/k/klac.html
STATUS: Sold back in the handle to its 17-week cup, moving just below the 18 day MVA Thursday but was back over that level to close by Friday. Volume was lower at 9.4 million (avg. 9.8 million), and we are looking for KLAC to hold support here for a move back up in the handle. The stock has pulled back below the November high (53.24) but we like the hold of support on low volume; KLAC found support on the move below the 18 day at its up trendline, which connects October lows. Target on a breakout: 70
BUY POINT: Aggressive: 54 on above average and rising volume. Stop: 50.22 (7%). Breakout: 57.73 on volume of 14.7 million or better. Stop: 53.69 (7%).
POSITION: Stock and/or March $45 (KCQ CI) calls to buy.
http://www.investmenthouse.com/ct/klac.html
BRCD (Brocade--$36.81; -0.95; optionable): Computer Peripherals
http://biz.yahoo.com/p/b/brcd.html
STATUS: Pulled back the last 2 days of the week, after making the nice move over its 200 day MVA (EMA; 39.13). The stock closed at the targeted support, the 10 day MVA, with volume rising to 16 million (avg. 18 million). BRCD can continue to pull back but look for support at 35 if it does (level of the 18 day MVA and other price support from June, July and August). We are looking for a strong move back up and over the resistance, and the December high at 40.23. Money flow still looks good. Target over the high: 45
BUY POINT: Aggressive: 37, after a pullback to test the 18 day MVA. Stop: 34.41 (7%)
POSITION: Stock and/or April $35 calls to buy (UBF DF).
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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