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Support and Resistance

Nasdaq: Closed at 1982.89.
Resistance: 2000. The up trendline is at 2005. The December high is at 2065.69.
Support: The 200 day MVA 1932.38; that is right at support at 1934 to 1941.

S&P 500: Closed at 1149.56.
Resistance: 1150 (former price consolidations). Then the December high at 1173.62, the 200 day MVA is at 1170.06, and the up trendline is at 1173. After that there is the middle of the March and April double bottom at 1183.85.
Support: 1125, former price consolidations, and the 50 day MVA (1127.09). After that, 1100 is next (top of the October consolidation range).

Dow: Closed at 10,070.49.
Resistance: Up trendline at 10,090. The 200 day MVA is still there at 10,109.30. The December high is at 10,169.44.
Support: 9992. The 50 day MVA is at 9750.15. After that, 9500.

Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.

12-18-01
Housing Starts, November (8:30): +8.2%. 1.645M actual versus 1.525M expected and 1.521M prior (revised from 1.552M).
Building Permits, November (8:30): +5.3%. 1.564M actual versus 1.470M expected and 1.485M prior (revised from 1.473M).

12-19-01
Trade Balance, October (8:30): -29.4B actual versus -$27.5B expected and -$19.0 prior (revised from -$18.7B).
Leading Indicators, November (10:00): +0.5% actual versus 0.2% expected and 0.1% prior (revised from 0.3%).

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: Under what conditions do you trade in the first hour? How long do you give the market before you jump in if you trade in the first hour? ...if market is opening up?...if opening down?... Do you respond differently depending on the direction of the market?

A: One of the age old dilemmas. You see the market open and stocks are running early. Do you get in right away and risk a stock tanking on you or do you wait and potentially miss a good move? Basically, if an index jumps over resistance, tests it and then moves back up, we will start taking some positions. Same to the downside if we are looking for an overall down move. For individual stocks we look at the same type of situation: does it breakout of a pattern that we are looking at? If so, we will take some positions at that point, but not a full position. We then let the day develop more to see how it acts and whether we want to add to the position that session (e.g., volume is what we want and the move is still holding).

On those moves up early, we are always concerned about the higher open and the pullback. That is why we usually wait for that test of the early move before we get in. On softer opens we will also go ahead and make investments on stocks making good moves if the markets catch themselves, preferably at support, and then turn right back up.

One problem is gaps on good news. We want to make a short or long term play on the stock. It announces some good news or is upgraded and moves higher. Do we chase it? Sometimes depending upon the news. When a solid company comes out and raises its own earnings forecasts above expectations, we often buy right then with stock and options. Our goal is to take a quick gain on the options maybe that day. With the stock it could be the same, or we could hold on depending upon how the stock performs during the session. Playing a gap on good news may be a play where a stock breaks out of a pattern, or it may just be making a play on the news. If it is a catalyst to the breakout, we can let the positions continue to work for us as breakouts can run a quick 20%. If the news is not going to break it out of a pattern, we are more playing the news and looking for the quicker gain.

So, while we don't like to initiate trades in that first hour (half hour for sure), we will do it at times based on either the market action, individual news on a stock, or individual moves on a stock (breakout and test), or all three. It is hardly ever a full positions, however, unless we are making that quick play on news where we want to bank the gain that session.

PLAYS TO LOOK AT:

BONUS PLAYS: GREAT MOVES by our recent bonus plays. Yesterday's bonus plays, PDX and CMH, made huge breakouts!

BRKS (Brooks Automation--$42.95; +0.85; optionable): Semiconductor.
http://biz.yahoo.com/p/b/brks.html
STATUS: Has fought back to its pre-September range, forming a cup. It broke out of a handle in early December, but could not hold a move over its 200 day MVA (42.70). However, it held on the breakout test, and today made a strong move back over the 200 day, closing over that level with volume of 1.13 million (average 775,500). Looking for a breakout over the early December (handle) high, at 44.20. Good money flow. Target: Early August highs at 52.50.
BUY POINT: 44.32 on 1.16 million. Stop: 41.22 (7%).
POSITION: Stock and/or April $40 calls to buy (BQE DH - check delta, open interest, etc. with your broker as not available at the time of writing).

C (Citigroup--$50.00; +1.90; optionable): Banking.
http://biz.yahoo.com/p/c/c.html
STATUS: Very strong move today with a strong sector, blasting back over a confluence of MVA's (50 day at 47.72) with big volume (18.4 million; average 14.4 million). It is back up against the resistance of its long-term down trendline (from August 2000, at 50.25), where it has failed three times in the last month or so. With the strength on this move, we are looking for it to finally take out resistance convincingly. The recent high from November is 50.99. Target: 57.50.
BUY POINT: 51.11 on continued strong volume. Stop: 47.53 (7%).
POSITION: Stock and/or March $47.50 calls to buy (C CI).

MARKET FAVORITES:

INFA ($14.75; +0.26): We have been looking at INFA quite a bit lately as it holds the 200 day MVA (13.70) on a gentle pullback. Volume has been very low, but today INFA suddenly took off, hitting our aggressive and breakout buy points while moving over its recent high of 15.56 on much higher volume (1.25 million; average 1.37 million). However, after hitting 16.48 it pulled back to close with a doji. Quite a bit of activity, and we have been looking for a move, and it could take off again. Holding onto existing positions as long as it holds support, and we will look for another move with a stronger market. In a rally, on a move over 15 with volume of 1.5 million, new or additional positions with stock and/or March $12.50 calls to buy (UYF CS).

EMLX ($39.59; +0.95): We were following EMLX as it made its last solid move in late-November and early December. It hit up to 40.81 before dropping back last week, but has since shown three consecutive dojis over the 10 day MVA (37.61), and after testing below that level for the fourth straight sessions today, EMLX moved back up on big volume (13 million; average 8.9 million). Looking for the breakout, with the buy point at 40.93 on volume of 13 million. Stock and/or April $35 calls to buy (UMQ DG).

PRE-ANNOUNCEMENTS: JCI and NDN look interesting.

BRL ($77.88; -0.47): Researching a split date. Little change today as BRL continues in its lateral pattern. Volume fell to 538,000 (average 1.1 million) as the stock tested down to the 10 day MVA (76.64) before pulling up to close with a tight doji in the range of the recent highs. Looking for support to hold while we wait for more strength to propel a breakout. The buy point remains 78.86 on volume of 1.5 million with stock and/or February $75 calls to buy (BRL BO).

BBBY ($32.51; +0.34): Forecast to announce a split during the market hours on 12-20-01 in conjunction with earnings. Tried to push through the short-term MVAs today, but the volume was weak (down to 2.5 million, average 4.38 million), stalling at the 10 day MVA (32.50). BBBY is trying to fight back after its abrupt drop back from the breakout, but is struggling with resistance from the MVA's and the up trendline that is currently at 33.80. With an announcement we will see if the news can push it over resistance. On a move over 34 on above average volume, stock and/or February $30 calls to buy (BHQ BF).

PRE-SPLITS:

XRAY ($49.53; +1.64): Splits 3:2 effective February 1. Made a strong move today on the news of a strong forecast. It hit a new all-time high of 51.14 early on, but gave up about half the gain as it pulled way off the high to close. The downward momentum to close could continue a bit tomorrow, but we are watching for it to hold 47.28 (the recent high) for a move back up. After holding, on a move back over 49 on continued strong volume (way up to 844,600 today; average 230,200), stock and/or January $45 calls to buy (XAQ AI).

KIM ($49.35; -0.14): Splits 3:2 effective 12-24-01. KIM closed with a 'hammer' doji over support at the 50 day MVA (49.29) today as volume shot way up to 317,000 (average 187,700). A high volume doji over support can presage a change, and it is especially nice after the strong move up last week followed by lower volume selling back. We have just two sessions left before the split, and we are looking for a bounce to take out its short-term MVA's (49.74). On that move, stock.

SYMC ($68.80; -0.97): Splits 2:1 effective February 1. The handle over the 10 day MVA (67.53) continues as volume increased just slightly today (up to 18.88 million, average 2.7 million). Still looking for volume of 4 million with a buy point of 71.12. Stock and/or January or April $65 calls to buy (SYQ AM or SYQ DM - February available next week).

PAST SPLITS:

FIC ($63.78; -0.02): Volume fell sharply today (down 94,900, average 195,500) as FIC moved in a shallow range and closed with a loose doji over the 10 day MVA (62.62). Still nicely holding over the recent pivot (60.13); we are just waiting to see if FIC can take out the breakout high from here. The buy point remains 65.12 on increased, above average volume with stock and/or April $60 calls to buy (FIC DL).

CONTINUING CANDIDATES: Also looking at GTK and AZO.

THC ($58.33; -1.21): Gave up the 50 day MVA (58.82) today as volume increased to 2.43 million (average 2.1 million). With that strong breach of support we look to the downside. We could get a test of the 50 day, and on a strong move down through today's low of 58.10 we can look at January $65 puts to buy (THC MM). Targeting the September-October lows at 54 (200 day at 52.16).

IGT ($66.48; -0.95): Sold back a bit today, but still held to close over its recent highs (66.20) and the 10 day MVA (65.31) as volume dipped back to 12.79 million (average 1.3 million). Still riding current positions toward the target of 75, and for support to hold here for a stronger move back over 66.50 on increased volume, with stock and/or January $60 calls to buy (IGT AL).

POST-SPLITS:

AMHC ($36.25; -0.08): Split 3:2 effective 11-26-01. Still holding the nice, slightly descending consolidation, today making a small move up from the 10 day MVA (35.49) on slightly lower volume of 117,600 (average 180,600). Nice pattern, and on a move over 37.44 on above average volume, stock. Nice, nice pullback.

Good Investing!
Jon L. Johnson and the Stock Split Report 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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