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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: Breakout from KKD! Remains a buy on the breakout up to 44.29 (stock and/or February $40 calls to buy). MNTG broke out to a new all-time closing high on big volume!

Stocks/Indexes from the Tuesday report:
AVID: Very nice tightening pattern. Pulled back with volume decreasing; the stock is holding support still at the 200 day MVA in a test of the breakout.
NABI: Broke out of a cup with handle yesterday and tried to move higher today. It closed with a small gain after pulling off the high at 11.03 in what started as a nice addition to the breakout.
BEAS: Pulled back on lower volume in the flat base pattern that is above the 50 day MVA.
BJ: A small move up on decreasing volume. The 18 day MVA is posing resistance on the move up in the double bottom.
GDT: Another promising breakout move that pulled back Held with a doji above support, with volume back down below average.
ISSX: Held with a small loss above support (18 day MVA). Looking for a bounce from this support.

Continuing plays:
BZH: Pulling back in a double handle now. Volume spiked Tuesday with the stock holding the 10 day MVA, as it did today. Breakout is over the December high at 77.10.
CBR: Started down in the handle, but held the 10 day MVA with volume dropping back sharply. Want to see it hold here.
DFXI: Moved up on strong volume today but pulling off resistance near an early December high. Breakout point from this new handle is aggressive at 32.63.
EXTR (put): Fell on rising volume (-$0.92) but holding with a tight doji just above the December low. (13.20 buy point, 12-15 report).
INRG: Still holding support at the 200 day MVA (EMA). Made a small gain from there with volume rising; needs to get over resistance just above 14.
NT: Broke support of the 50 day MVA on strong volume. Can fall to 6.30 to 6.00.
PSFT: After yesterday's breakout, the stock pulled back slightly, closing a few cents below the buy point with volume falling (is below average). Looks like it is ready to move up; just needs a strong Nasdaq rally. May re-test the intraday low (40.90).

SUBSCRIBER'S CHOICE:

IDNX (Indentix--$14.10; +0.80; optionable): Business Software
http://biz.yahoo.com/p/i/idnx.html
STATUS: This software stock is in a 21-month base and making a good first move up the right side of it. IDNX broke out of a small cup pattern that formed since early October, absolutely flying out of it on huge volume. It pulled back in a quick handle to a larger cup that started back in early November of last year and today made a nice move up with volume surging higher again (2.25 million; avg. 824,000); news was out concerning some new contracts for the company. The stock was up to 15.05 on the high, tapping near the recent breakout high of 15.40. We will look for volume to continue rising to push the stock over that high, or, IDNX may need to consolidate and form a longer handle to the current base. Showing super money flow and buying. Target: 18 (initial).
BUY POINT: Aggressive: Over 14.10 on continued rising volume. Stop: 13.16 (7%)
Breakout: Over 15.40 on volume of 1.2 million or higher, after a pullback.
POSITION: Stock and/or March $10 or $12.50 calls to buy (IDX CB or CV). Deltas unavailable.

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

Best Plays:
1) TOL: A new all-time closing high and can tack on more here.
2) EMLX: A tech favorite that made a solid move today.
3) UTSI: Testing the breakout.
4) AJG: Descending wedge.

New:

TOL (Toll Brothers--$44.45; +1.87; optionable): Materials & Construction
http://biz.yahoo.com/p/t/tol.html
STATUS: TOL made a breakout move from a double bottom with handle base over a week ago but did not move over resistance at the middle hump of the 12-month pattern (43.99). It pulled back for a quick test of support at the 42 level then managed today to break over the former resistance on rising, strong volume of 972,800 (avg. 488,000). Housing starts came in Tuesday higher than expected; TOL did not participate in a rally on that news, instead getting hit with some profit-taking as it tried to break out. That move was delayed until today, and an upgrade helped. Looks ready to head higher after moving over the resistance and posting a new all-time closing high, but still has a stray December high at 44.50. Huge money flow and buying. Target: 53
BUY POINT: 45.25 on continued strong volume. Stop: 42.08 (7%).
POSITION: Stock and/or March $40 calls to buy (TOL CH).

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

Previously covered:

EMLX (Emulex--$39.59; +0.95; optionable): Computer Hardware
http://biz.yahoo.com/p/e/emlx.html
STATUS: EMLX made a nice run up over the last 2 weeks and has pulled back in a handle to a 7-month cup with handle. After three consecutive dojis above its 10 day MVA (37.61) and a Monday test of the 18 day MVA, the stock was up in a solid move today with volume surging up sharply to 13 million (avg. 8.9 million) in part on news of a deal with Hewlett-Packard. A nice move, and we are looking for a breakout over the handle high at 40.81. 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

UTSI (Utstarcom--$28.30; +0.35; optionable): Telecom
http://biz.yahoo.com/p/u/utsi.html
STATUS: Broke out of a double bottom earlier this month, a strong breakout on huge volume. The stock is now testing that move, having dropped back on steadily decreasing volume to test support at the 18 day MVA (27.00). The pullback can be called a handle to the stock's longer saucer base (dating from mid-July 2000). Showing a shooting star doji (bullish) at the support, UTSI looks ready to make a move back up, and we like the rising volume (1.4 million; avg. 1.5 million). Breakout high is 31.43. Excellent money flow and buying. Target: 38
BUY POINT: Aggressive: 28.35 on above average volume. Stop: 26.37 (7%)
Breakout: 31.56 on volume of 2.3 million or better. Stop: 29.35 (7%)
POSITION: Stock and/or February $25 calls to buy (UON BE).

http://www.investmenthouse.com/cd/utsi.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

A possible put play:

AJG (Arthur J. Gallagher--$34.62; -0.09; optionable): Insurance
http://biz.yahoo.com/p/a/ajg.html
STATUS: The stock has entered a short term downtrend, and for the last week (after selling below the 50 day MVA, 34.95 current) continues to hold up below that resistance but if it cannot move back over may break support and tumble. The pattern is a descending wedge: lower highs and a constant low. It is the opposite of an ascending wedge that builds pressure from below. It moved up to the 50 day over the last three days on wishy-washy volume, and as volume surged above average today to 584,100 (avg. 639,227), failed to make the move back over. On a break below the 34 range, the stock can drop to 31 for an initial target; below that, 30.
BUY POINT: Aggressive: 34.50 on continued rising volume. Below 34: 33.95 on continued rising volume.
POSITION: January $40 puts to buy (AJG MH).

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

FRX: Broke over a shorter term down trendline on rising volume yesterday but today closed just under a longer term trendline (connecting July and August highs). The shorter term line connects August and October highs. Buy point is over 80 on a break over the resistance. August high is ahead at 81.98.
NVDA: A strong semiconductor and fully worthy of its position as a new leader. The stock was down with the sector today, but volume was lower and NVDA can hold the 10 day MVA (63.42). It has bounced from that support three times since late November, and may give another, but will likely test back to the 18 day MVA near 60 in the near future.
MYL: Did make the breakout we were looking for, completing on the move the short 5-week cup. Is pulling back and forming a handle now on very low volume. Very good.
DGX: Broke over its down trendline (connects July and October highs) yesterday and pulled back today, with a tight doji on high volume. The stock has almost completed a 7-week cup and can form a handle here.

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

None covered tonight.

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

MSFT: Moved up on rising volume today, though with volume still below average pulled away from resistance at the 70 range. The stock hit the buy point of 69.13 on a move out of the ascending wedge, and remains a buy up to 72.59 if volume continues to climb to keep price rising.
BUD: Made it over the down trendline with volume breaking higher above average. Tapped resistance at 44 and pulled back. On a move over the July high near 45, BUD will be on its way to moving up the right side of its 13-month base.
BRCM: Broke below the 50 day MVA. We will see if it digests this move well enough for a quick move back over that former support.

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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