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Begin Part 2 of 2
THE PLAYS: QLGC moved down, but on a big gap down, not good action for entering the put play. BORL moved up from the 18 day MVA on rising volume; holding there was the cue to buy back the calls sold on the move down to the support and look at buying more stock (and/or options) on the way back up.
Best Plays:
1) AFCO: Good price/volume action in the handle.
2) TUNE: A hammer doji in the test of the breakout.
3) ORBK: Holding support in its test. Still low volume but heading higher.
4) IBM: Still a buy on its breakout.
5) EMLX: A solid move and set up for more.
6) SERO: Stronger volume in the handle.
7) CHKP: Under the 200, but looks ready.
8) BRCD: Up on a down tech day.
NEW PLAY:
AFCO (Applied Films--$30.70; -0.60; optionable): Semiconductor
http://biz.yahoo.com/p/a/afco.html
STATUS: Holding support at the 18 day MVA (29.86) in the handle to a 14-month cup base. Volume continues to decrease in the handle, down Wednesday to 84,000 (avg. 207,000). The stock is showing good price/volume action in this portion of the pattern, and we are looking for a move up and breakout over the December high at 34.47. Showing excellent money flow and good buying. Target: 42. Don't let the sector scare you; good pattern.
BUY POINT: 34.60 on volume of 311,000 or higher. Stop: 32.18 (7%).
POSITION: Stock and/or April $30 calls to buy (UOF DF). Low open interests, and delta unavailable at the time of this writing.
http://www.investmenthouse.com/ct/afco.html
From Monday:
AVIR (Aviron--$49.60; -0.06; optionable): Biotechnology
http://biz.yahoo.com/p/a/avir.html
STATUS: Made the buy point for the cup with handle breakout Tuesday, but showed a doji on falling volume that day and continued with the same action today (volume down to 514,100; avg. 928,000). Without stronger volume, AVIR can pull back to test the 10 day MVA (47.01). If it does, it will likely try to form an ascending wedge for a handle, not great action but can still give a breakout (we prefer the gradual descending handle). Highs at the start of the base are near 63; our target is 59 for now. Excellent buying and good money flow.
BUY POINT: Breakout: 50.13 on volume of 1.4 million or higher. Stop: 46.62 (7%).
POSITION: Stock and/or February $45 calls to buy (QCV BI).
http://www.investmenthouse.com/ct/avir.html
FMKT (Freemarkets--$23.71; -0.59; optionable): Software (internet)
http://biz.yahoo.com/p/f/fmkt.html
STATUS: Hit the buy point in the cup with handle (24.13) Tuesday, but the move was on sharply lower volume so the move was small. Wednesday the stock pulled back slightly, showing a tombstone doji on higher volume (1.2 million, average levels). Looks ready to pull back further, so can test the 10 day MVA (22.46) or the 22.80 range. After the short handle formed last week, FMKT can now work on a more extended handle pullback if it will, which can lead to a successful breakout. Money flow and buying are at excellent levels. Target: 29
BUY POINT: Breakout: Over 24.35 on volume of 1.5 million or higher. Stop: 22.69 (7%)
POSITION: Stock and/or April $20 calls to buy (FAQ DD).
http://www.investmenthouse.com/ct/fmkt.html
GENZ (Genzyme--$60.80; +0.92; optionable): Biotech
http://biz.yahoo.com/p/g/genz.html
STATUS: Hit the buy point at 59.83 leaving the December highs behind. Volume was up to 4 million (avg. 5 million), still under average but we will look for that to improve with the stock heading higher. Remains a buy on the move, but only with the improved volume. Money flow and buying are leading the way at strong levels. Target: 72.
BUY POINT: A buy up to 62.82 on volume of 7 million or higher.
POSITION: Stock and/or April $50 calls to buy (GZQ DK).
http://www.investmenthouse.com/ct/genz.html
New (from the weekend):
TUNE (Microtune--$22.99; -0.19; optionable): Consumer Durables
http://biz.yahoo.com/p/t/tune.html
STATUS: TUNE sold back Monday after trying to break resistance at the 24.40 range, but has held the 10 day MVA since (not without dropping to the 18 day MVA in today's trading, at 21.76). We like the recovery move, and volume was up at 1.5 million (avg. 1 million) as the stock enjoyed an upgrade from Salomon S.B. Looking for a move up from this level for a breakout over the recent highs (25.10 and 25.69). TUNE is testing its breakout from a 5-month base. Target: 30. Strong money flow and high relative strength.
BUY POINT: Aggressive: 23.75 on continued rising volume.
POSITION: Stock and/or April $20 calls to buy (TUF DD).
http://www.investmenthouse.com/ct/tune.html
NBIX (Neurocrine Biosciences--$51.65; -0.80; optionable): Health Services
http://biz.yahoo.com/p/n/nbix.html
STATUS: After Monday's nice pop higher, NBIX continued to see falling volume next session and pulled back, repeating that action today though volume was higher (still strong at 845,500; avg. 519,000). The stock hit just above the 10 day MVA (49.86) on the intraday low of 50.30, then bounced back up to close with a looser doji. Can see another test of the support if not the 50.50 range, where the stock bumped up against some resistance early this month. Target: 58. Money flow and buying are excellent.
BUY POINT: Pullback: 51, after a test of the 50.50 range and on a strong move back up.
POSITION: Stock and/or February $45 calls to buy (UOT BI).
http://www.investmenthouse.com/ct/nbix.html
ULGX (Urologix--$20.71; -0.92; optionable): Health Services
http://biz.yahoo.com/p/u/ulgx.html
STATUS: After Monday's break of resistance (after ULGX tested its strong move over the 200 day MVA), the stock edged higher on stronger volume, making our buy point of 21.45 in the cup base. However, with volume surging strongly Wednesday, ULGX could not move over 22 (Tuesday's high), instead selling back. The move was not drastic, but not at all what we wanted; we can see ULGX test the 10 day MVA at 19.74 before it firms back up. The 18 day MVA is lower at 18.66. Money flow is decent and buying looks good. On a move back over 22, our target remains, initially, 26. Volume strong at 391,300 (avg. 133,181).
BUY POINT: Pullback: Aggressive: on a move back up from the 20 range on continued strong volume. Breakout: Over 22 on volume in range of 180,000. Stop: 20.55 (7%).
POSITION: Stock and/or April $17.50 calls to buy (OZU DW). No delta at the time of this writing.
http://www.investmenthouse.com/ct/ulgx.html
COHU (Cohu Inc--$19.20; -1.49; optionable): Semiconductor
http://biz.yahoo.com/p/c/cohu.html
STATUS: Sold down to the 50 day MVA (19.09) on rising volume of 60,600 (avg. 75,000) as the semiconductors had a bad day. Not the best move in the handle to the 6-month cup; back to starting over. That does not mean it can get back over the 18 day MVA (19.91) anytime soon, but it has to regroup and show good action again. Money flow remains high (ticked down slightly with the selling), and buying remains strong. The 200 day MVA is just below at 18.73. Target: 26
BUY POINT: Aggressive: 20 on above average volume. Stop: 18.60 (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--$30.46; +0.13; optionable): Diversified Electronics
http://biz.yahoo.com/p/o/orbk.html
STATUS: ORBK, after testing the 18 day MVA Friday and Monday, moved back over some resistance at the 200 day MVA (EMA) at 30 and is holding just above that level the last 2 days. The stock hit our aggressive buy point at 29.60 on Tuesday. Volume was higher today (144,000; avg. 261,000) with ORBK making a small move up; on continued rising volume we are looking for this test of the breakout to result in another breakout, this time over the December high (32.30). Good money flow. Target: 37
BUY POINT: Holding positions taken at the aggressive buy point. Breakout: Over 32.30 on above average volume.
POSITION: Stock and/or April $25 calls to buy (OKQ DE).
http://www.investmenthouse.com/ct/orbk.html
ESST (Ess Tech--$23.00; +0.83; optionable): Semiconductor
http://biz.yahoo.com/p/e/esst.html
STATUS: After Monday's selling, ESST has held support of the 10 day MVA (21.57). The stock repeated Monday's action, selling back again, but finally made a positive move stick today, continuing to hold the support with volume falling back to 1.5 million (avg. 688,000). Looks like 22 is good support, so with a hold in that range as volume continues to slacken, we will look for a move back up. New December high from Tuesday is 24.45. Target: 29. Money flow and buying strong.
BUY POINT: Aggressive: 23.75 on rising volume (1.5 million+). Stop: 22.09 (7%)
POSITION: Stock and/or April $20 calls to buy (SEQ DD).
http://www.investmenthouse.com/ct/esst.html
SANM (Sanmina--$21.49; -0.31; optionable): Electronics
http://biz.yahoo.com/p/s/sanm.html
STATUS: Slipped below support at its 200 day MVA (21.93) though volume was lower on the move to 9.4 million (avg. 9.6 million). SANM showed a tight doji at the bottom of a pullback that has lasted 6 days, and while we were looking for it to hold the support at the 200 day, as it did for three days in a lateral movement, it may be able to pullback back over the resistance in a rally. SANM has been testing its breakout over the 200 day MVA, and we are not thrilled that it has moved back below that support. The stock has a string of prices just over 21 that can support it here, and below that is the 50 day MVA, 19.77. Money flow still high though turning down somewhat. Buying looks solid. Target: 29
BUY POINT: Aggressive: 22.50 (over the 10 day MVA, 22.79) 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--$19.47; +0.84; optionable): Internet Software
http://biz.yahoo.com/p/a/aloy.html
STATUS: Broke to a new closing high for this year at least, taking out some resistance at the 19 range. The stock still has to break ahead of the December high at 19.70, and will need rising volume to succeed. Volume was back down to 512,600 Wednesday (avg. 444,000), still strong at above average levels. The move was strong as well, with ALOY tapping almost down to the 18 day MVA on the low of 17.82, then bouncing back to make the new high. Target: 22. Money flow and buying excellent.
BUY POINT: Aggressive: 19.50 on rising volume. Stop: 18.14 (7%)
POSITION: Stock and/or February $15 calls to buy (YLQ BC).
http://www.investmenthouse.com/ct/aloy.html
Puts: Removed DCTM.
MANH (Manhattan Assoc--$29.03; -0.52; optionable): Software
http://biz.yahoo.com/p/m/manh.html
STATUS: Still cannot hold over the 50 day MVA (29.43) as volume weakens ever more. It may be about ready to give it up, but we have to watch the 200 day MVA below at 27. Volume: 246,300; avg. 564,000. Showing a tight doji just under the resistance, MANH is going to try again to break back over the 50 day. The 200 day MVA is now at 27.02. Continuing to keep the current buy point for the downside move, if it happens.
BUY POINT: 26.90 on continued rising volume.
POSITION: January $40 puts to buy (MQR MH).
http://www.investmenthouse.com/ct/manh.html
SPC (Saint Paul Companies--$44.86; +0.53; optionable): Insurance
http://biz.yahoo.com/p/s/spc.html
STATUS: Continues to hold above 44, the level just above our buy point for the put play. The stock continues to see declining volume (down Wednesday to 928,800; avg. 1.7 million), and below a key resistance point, that is a signal it may be ready to fall further. The stock hit our initial buy point for the play, so on a move below 44 can offer an opportunity to add to positions. Target: initial, 40.
BUY POINT: Below 44 on rising volume.
POSITION: January $55 puts to buy (SPC MK).
http://www.investmenthouse.com/ct/spc.html
CONTINUED PLAYS:
TEST OF BREAKOUT:
IBM ($123.89; +1.69; optionable): Computer Hardware
http://biz.yahoo.com/p/i/ibm.html
STATUS: Broke out (buy point 123.34) on higher volume (7.7 million; avg. 8 million). The stock tapped 124.70 on the high, at the level of the upper channel line. We will see if volume can break over average and push IBM over that resistance to continue the breakout. Money flow strong and climbing, and relative strength moving higher as well. Target: 147.
BUY POINT: Remains a buy on the breakout to 129.51.
POSITION: Stock and/or January $115 calls to buy (IBM DC).
http://www.investmenthouse.com/ct/ibm.html
ORLY (O'Reilly Automotive--$38.00; -0.19; optionable): Auto Parts
http://biz.yahoo.com/p/o/orly.html
STATUS: ORLY broke out Monday, headed higher Tuesday but pulled back today as volume continued to decrease (do to 383,400; avg. 550,000). The stock enjoyed a buy rating from Salomon Smith Barney, but that was not enough to extend the breakout (remains a buy up to 39.35). The low of 37.62 tapped right at the breakout day's closing price, so ORLY may be able to hold that support or the buy point at 37.48 for a move back up. We will look for the hold there. Target: 41. Excellent money flow and buying.
BUY POINT: 38.40, after a hold at the 37.50 range or higher, on a move over 38.36 on above average volume.
POSITION: Stock and/or February $35 calls to buy (OQR BG). Delta unavailable.
http://www.investmenthouse.com/ct/orly.html
XLNX (Xilinx--$39.24; -2.27; optionable): Semiconductor
http://biz.yahoo.com/p/x/xlnx.html
STATUS: Sold harder on the MU news with higher volume, but held above the 200 day MVA (38.50) still. After a weak bounce from that support, XLNX showed a doji Tuesday and gapped down today on sharply heavier volume of 9.2 million (average 9.6 million). Struggling, and we will look for XLNX to hold the 200 day again, and with a stronger market and sector show us a better move back up over its recent highs (43.25) and toward the resistance of its April-June highs at 50, which is our target. 50 day MVA is at 36.56.
BUY POINT: Breakout: Over 43.25 on strong volume in a rally (12 million). Stop: 40.22 (7%). Aggressive: In a stronger chip sector, a move over 41 on above average volume. Stop: 38.13 (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--$39.59; +0.95; optionable): Computer Hardware
http://biz.yahoo.com/p/e/emlx.html
STATUS: Nice move on a down tech session. EMLX made a nice run, but now has pulled back in a handle to the 7-month cup with handle. After three dojis, EMLX tested below its 10 day MVA (37.61) for the fourth consecutive session, but managed to move back up on sharply higher, strong volume of 12.97 million (average 8.9 million). A nice move, and we are looking for a move over the handle high at 40.81 for the breakout. Strong money flow. Target: 50
BUY POINT: Breakout: 40.94 on volume of 13 million or higher. Stop: 38.07 (7%)
POSITION: Stock and/or April $35 calls to buy (UMQ DG).
http://www.investmenthouse.com/ct/emlx.html
SERO (Serologicals--$20.85; -0.03; optionable): Biotechnology
http://biz.yahoo.com/p/s/sero.html
STATUS: Still moving in a handle (now over 3 weeks old) to its 6.5-month cup base. It made a move Monday over its recent closing highs, but volume was not there and it pulled back, today tapping through the support of its 18 day MVA (20.16) before recovering a bit to close. Volume remained rather low at 210,100 (average 250,300). Still looking for the breakout, but we need to see an infusion of volume. Excellent money flow and buying. Target: 27
BUY POINT: 22.13 on volume of 375,000 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--$50.60; +0.44; optionable): Retail
http://biz.yahoo.com/p/h/hd.html
STATUS: After Friday's move up in the handle to its 7-month cup-type base, HD has not been able to sustain the strength. It has taken out the former handle high (50.40), but the moves the last three sessions have been small, with decreasing volume (down to 6.35 million today; average 8.7 million). However, the handle high was only part of the issue, as there is additional resistance at the 50-51 range from June-August levels. Good money flow and buying, so we continue to see if the stock can break through with a strong move. Target: 61
BUY POINT: Breakout: 51.17 on volume of 13 million or higher. Stop: 47.59 (7%)
POSITION: Stock and/or February $45 calls to buy (HD BI).
http://www.investmenthouse.com/ct/hd.html
VRTS (Veritas--$43.89; -2.13; optionable): Software.
http://biz.yahoo.com/p/v/vrts.html
STATUS: VRTS has been easing up the 10 day MVA (43.36), but the steady move on weak volume has met resistance at its 200 day MVA (46.54). It gapped up and ran at that level Tuesday (high 46.28), but volume continued to be below average, and VRTS gapped back down with the market today and closed just over the 10 day. Volume was up but still not at the average (12.5 million; average 15.6 million), so we will see if VRTS can form a better consolidation from which to make a move, perhaps visiting its 18 day MVA again (currently 41.91; 50 day down at 37.80). Target: 56
BUY POINT: Over the 200 day on above average volume, perhaps after forming a consolidation over support. Stop: 43.39 (7%)
POSITION: Stock and/or February $40 calls to buy (VIV BH).
http://www.investmenthouse.com/ct/vrts.html
CHKP (Check Point Software Tech--$43.55; -0.82; optionable): Security Software
http://biz.yahoo.com/p/c/chkp.html
STATUS: Tried a move back up this week, but did not have the volume to run through resistance at the 200 day MVA (44.72). After a weak move at that level Tuesday, CHKP gapped back today, holding support at the 10 day MVA (42.14) and the highs in its wedging handle (to the 4.5 month cup with handle pattern), but only managing a loose doji on much lower volume (4.43 million; average 10 million). Not the greatest pattern at this point, but we will see if it can hold the 10 day and make a strong move over the 200 day for positions (Tuesday's high 44.95). Target: 53.
BUY POINT: Over the 200 day MVA on above average volume. Stop: 41.75 (7%)
POSITION: Stock and/or April $40 calls to buy (KEQ BH).
http://www.investmenthouse.com/ct/chkp.html
KLAC (Kla-Tencor--$52.61; -3.06; optionable): Semiconductor
http://biz.yahoo.com/p/k/klac.html
STATUS: Weakness in semis and KLAC fell back again today, gapping down and then continuing to close just below its up trendline (connecting lows since early October). Last week the stock touched as low at 51.35 before attempting a recovery, but again it could not break from the handle to its 17-week cup, retreating from its down trendline connecting September and May-August highs. We will need to see it hold here (50 day is all the way down 49.07) and take out resistance above. Target on a breakout: 70
BUY POINT: 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--$34.31; +0.53; optionable): Computer Peripherals
http://biz.yahoo.com/p/b/brcd.html
STATUS: Sold back rather hard, but pulled off of a low of 32.50 Tuesday (just above the 200 day MVA; we like to see that as it indicates buyers coming in at that level) and managed to come back a bit today. It could not hold a move back over its 18 day MVA (34.81), moving on lighter but strong volume of 23 million (average 18.5 million). It is holding at key support - the highs in its former handle consolidation, and over the convergence of the 200 day and 50 day MVA's (31.56 and 31.18). On this test we are looking for BRCD to hold support here, and with a stronger market make a move back toward the recent high (40.23).
BUY POINT: Aggressive: Over the 10 day MVA at 35.64, with continued strong volume. Stop: 33.15 (7%)
POSITION: Stock and/or April $30 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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