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Begin Part 2 of 2

THE PLAYS:

Reading the Plays: Please note that when we reference the 10, 18, and 50 day moving averages (MVA), those are exponential moving averages (EMA). The 200 day moving average is always simple (SMA). We will note when we reference a particular MVA differently, e.g., a simple 50 day MVA. Please click on the Yahoo and chart links for company and charting information. A "prior high" refers to the high at the start of a base.
For conserving space on listings of stop losses, the symbol (7%) indicates that the stop is 7% below the buy point.

Good movers from the reports: EAT, SIB, FRX, TARO, BMET, MSFT, WMT!

Stocks/Indexes from the weekend report:

MCTR: A small move up on rising but still below average volume.
AV: Popped higher to close with a doji on higher volume.
EXTR: Held at support on the low of 13.18. Volume lower.
KSWS: Holding support at 34 with volume dropping below average. Still looks good for a move up in a rally.
CPWR: Pulled back on lower volume, showing a doji above potential support at 13.
MNTR: Held with just a small loss as volume dropped back well below average.
HDI: Edged higher on rising volume.
MSFT: Broke above the down trendline, still just under our buy point but looking good on the rising volume.

Continuing plays:
ARDI: Looks good in the handle, back over the 18 day MVA.
AXP: Moved back over the 50 day MVA on low volume. If it does not fall back below this level we will have to end the put play.
IDXX: Wants to break out (nice move up) but needs stronger volume.
IPIC: Back up on rising volume; ready to make the breakout over 9.
RBK: Tight doji on low volume. Still below the 200 day MVA but a nice-looking pullback.
SYMC: Being added to the Nasdaq 100 index and a stock split announcement!
WMI: Up on rising (strong) volume today.
Indexes: SOX back over resistance at the 200 day MVA. If it does not fall tomorrow, that will chase us out of the puts. DJX call play continued with a bounce from the 50 day MVA on lower volume. QQQ call play moved back over its 200 day MVA with continued decreasing volume.
WMT: Major bounce off of the 50 day MVA. Now the next play is the breakout. See the 12-05 report (buy point 56.65 in the cup with handle).

SUBSCRIBER'S CHOICE:

VRTS (Veritas--$44.30; +0.35; optionable): Software
http://biz.yahoo.com/p/v/vrts.html
STATUS: A former leader that is looking good in an uptrend from the September lows. VRTS has climbed the 18 day MVA up to its current resistance, the 200 day MVA (46.85), and is tightening up nicely on decreasing volume. VRTS made a move last week out of an ascending wedge-type handle (to its 4-month cup) but the 200 day halted the move and the stock has shown several loose dojis as it flirts with its former buy point (44.11). Volume was even lower Monday (8.9 million (average 15.7 million), and we look for VRTS to hold support at the 10 day MVA (42.63; low today 43.04) as it squeezes in with the 200 day MVA (46.77), and to move over that resistance. Target: 56
BUY POINT: Over the 200 day on above average volume. Stop: 43.50 (7%)
POSITION: Stock and/or February $40 calls to buy (VIV BH).

http://www.investmenthouse.com/cd/vrts.html

Best Plays: Some nice-looking patterns here.
1) CBR: Nice cup with handle.
2) INRG: Testing the breakout.
3) PSFT: Getting ready to break out.

New:

CBR (Ciber Inc--$8.96; +0.08; optionable): Information Technology (software)
http://biz.yahoo.com/p/c/cbr.html
STATUS: A cup with handle base of 25 weeks (highs at 9.50). The handle is a lateral-moving pattern, with volume still a bit high but lower relatively than it was on the breakout run that completed the right side of the cup. It was down to 123,100 Monday (average is 146,000) while the stock posted its second small gain in the handle in 2 days. Looking for a breakout over the December (handle) high at 9.15, though we are plotting a buy point over 8.99, a price hit 3 times in the handle. CBR has excellent money flow and strong buying. This pattern has formed off the lows of a base of about 3 years' length. Target: 11
BUY POINT: Breakout: 9.12 on volume of 219,000 or higher. Stop: 8.48 (7%)
POSITION: Stock and/or February $7.50 calls to buy (CBR BU).

http://www.investmenthouse.com/cd/cbr.html

INRG (Inrange Tech--$13.36; -0.41; optionable): Telecom
http://biz.yahoo.com/p/i/inrg.html
STATUS: Testing its recent super breakout over the 200 day MVA (11.53), forming a handle after making that move. Volume was huge on that run, and has dropped back to below average levels on the test of the breakout, with the stock moving laterally, tapping 13 on the low intraday repeatedly. It is using its 10 day MVA (12.65) as support in this handle. INRG showed a tight doji Monday with volume slightly on the rise (401,900; avg. 426,136). The stock can test down to the moving average, but we are looking for another strong move back up and break over the December high (15.80). Huge money flow and buying. Target: initial, 18
BUY POINT: Aggressive: 14.50 on volume in the range of 575,000. Stop: 13.49 (7%); Breakout :14.97
POSITION: Stock and/or February $12.50 calls to buy (UME BV). Deltas unavailable.

http://www.investmenthouse.com/cd/inrg.html

Previously covered:

PSFT (Peoplesoft--$39.77; +1.27; optionable): Application Software
http://biz.yahoo.com/p/p/psft.html
STATUS: Another cup with handle (nearly 6 months in length) from a software stock, a pattern that is actually the second half of a large double bottom that started in January. It is the larger pattern that we were looking for PSFT to complete when the stock hit its second bottom (that slightly undercut the first, just what the pattern is supposed to do) back in September. Currently in the handle, PSFT moved up from recent good support at the 10 day MVA (38.53) with volume rising to 7.5 million (avg. 9.8 million). The current handle can be a handle to the bigger base; the buy point is the same whether you call it a double bottom or a cup with handle. Looking for the breakout move over the December high (42). Money flow looks good. Initial target: 51
BUY POINT: 42.15 on volume of 14.7 million or higher. Stop: 39.20 (7%)
POSITION: Stock and/or April $35 calls to buy (PQO DG).

http://www.investmenthouse.com/cd/psft.html

PORTFOLIOS: Each report, we look at these to see which is in a buy position. We don't cover them all each time, just the ones that look ready to pick up a few shares.

THE LEADERS: New Leaders (new list): ACS, NVDA, DGX, FRX, LLL, CACI, AJG, KRON, MIKE, BMET, APPB, LOW, IDPH, TARO, MYL, IGT, VRSN

Drug stocks were rallying and we got some good moves from FRX, TARO, IDPH.
BMET: Broke over a short term down trendline and its 50 day MVA on good volume.
ACS: Broke over its upper channel on very strong volume. Great move, but we will be careful and look for a top in a few sessions: massive volume and a reversal.
LLL: Niece bounce above the 50 day MVA on big volume. Forming the right side of the cup.
IGT: No pressure here on the news of SLOT's acquisition. Charged to a new high on great volume. Still a buy.
LOW: Still testing the strong run on its pullback to the 10 day MVA (on steadily decreasing volume). Getting ready.

UP & COMERS PORTFOLIOS: Here is the new portfolio list: BBBY, EPIQ, KKD, MMS, NDN, SRCL, CPRT, BJ, EBAY, THQI, KG.

EBAY: Made a nice move up today but was down after hours on news its COO was leaving. In a cup with handle and the handle is fairly ragged, so we'd like to see that settle out better. Still, buy point will be 71.30 on a move out of the pattern.
MMS: Moving up in the handle to a short double bottom, but needs to take out is down trendline near the December high (43.62).

MEMBER PORTFOLIO: New portfolio as selected by the subscribers. Some of these stocks are still struggling to move higher in their bases, and will likely continue to trade in close ranges just like the market. We'll be ready to catch them when they are ready to move. The new list: BRCM, CHKP, AMAT, JNJ, MSFT, AOL, HGSI, BUD, PXLW.

Old members: BRCM, CHKP, CSCO, EMLX, IDTI, INTC, JDSU, MVSN, NT, PWER, SUNW, VTSS

PXLW (Pixelworks--$16.64; -0.21; optionable): Semiconductor
http://biz.yahoo.com/p/p/pxlw.html
STATUS: In a double bottom with handle that is below the 200 day MVA (18.74). The stock had a nice run up to complete the right side of the base (which is part of a 15-month base and off the lows near 10) and now is pulling back in a well-formed handle with overall decreasing volume (down Monday to 700,800; avg. 1.16 million). PXLW is holding the 18 day MVA, closing just on top of that support with a tight doji. Look for a move up soon, looking at positions on a breakout over the December high, just above the 200 day MVA, at 19.36. Patterns that are below the 200 day MVA are not the best, but this stock has been doing much better and with the pattern shaping up well looks like it can made a good stab at a breakout. Buying is looking good and money flow is off the floor and trying to pull up, but flat in the handle. Initial target: 23
BUY POINT: Aggressive: Strong move over 17 in a semiconductor rally. Breakout: 19.49 on volume of 1.7 million. Stop: 18.13 (7%)
POSITION: Stock and/or April $15 or $17.50 calls to buy (PUO DC or DW). Deltas unavailable.

http://www.investmenthouse.com/cd/pxlw.html

Good Investing!
Jon L. Johnson and The Daily 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.

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