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Weekend Newsletter for
October 15, 2006
Table Of Contents 1) MARKET SUMMARY 2) STOCK SPLIT PLAY 3) TECHNICAL PLAY 4) COVERED CALL PLAY |
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| | Stock Split Notices Investing Q & As Glossary |
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1) MARKET SUMMARY
> >From "The Daily" at InvestmentHouse.com
Growth sectors lead once more to end the week.
- Market posts more gains to close a week that saw NASDAQ, SOX, SP600 come to life.
- Retail sales just the latest reason for bond market to come around to the stock market's point of view.
- Baby boomer's and the stock market's future.
- Energy prices are falling once more, just in time for this week's key (at least to the Fed) CPI.
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Market Summary (continued)
After the big Thursday breakout stocks were a bit lower pre-market, somewhat hung over from the Thursday party that saw NASDAQ continue its breakout and the small cap SP600 join the action as well. Oil was up (58.67, +0.81) as Norway closed part of a major field for needed repair work. Retail sales were down on the headline number, and though it was all due to lower gasoline sales (lower prices), the market was still digesting the news into the open. There was also more Fed-speak, and once more some of it was quite hawkish (Moskow again bellowing about inflation too high; he probably wants more people jobless as he stated in 2000), but some if it very rational (Poole, now the moderate, suggesting he would back cutting rates if the economy falters). Six wanting to hike, one willing to consider a cut if things were going to hell; investors were not too uplifted by the prospects.
Stocks still managed to start just about flat and immediately NASDAQ, chips, and the SP600 started to rise. SP500 and DJ30 lagged, holding negative, but they were not selling off as the early futures indicated might be the case. Michigan sentiment (preliminary for October) came out much stronger than expected at 92.3 (86.5 expected), and that goosed the upside a bit more. Inventories came out at 10ET, and while they rose a bit more than expected (0.6%), as with wholesale inventories, sales rose more (0.8%). All the while the market was figuring out that the retail sales data was really quite solid, further corroboration with the Thursday trade gap numbers that show a lot of buying anticipated in the consumer sector. The dollar rose to an 11 month high against the yen on all of the news. Things were turning positive.
It all added up to more upside. The large cap industrials lagged negative most of the session as stocks once more put on a nice afternoon show. They all turned positive with just about 2 hours left, but then softened toward the close as we expected. After another good week, some profit taking ahead of the weekend was typical. Early on we took a few positions in some techs and also some partial gains on positions that had put in a good week. Market makes a solid move up, bank some gains, look for opportunity, let the rest of the positions run in a good market.
Read "The Daily" Entire Weekend Summary
Here's a trade from "The Daily" and insights into our trading strategy:
Company Profile
We had been looking for the semiconductors to start higher as money rotated out of some of the defensive sectors investors turned to during the selling. We always look for the leaders in a group to see if they are forming good patterns, patterns that show accumulation. LRCX is a leader in its sector and in the market in terms of fundamentals growth rates, and when we saw the pattern it was developing we put it on the report on 9-30-06 when it started to test a strong mid-September move that cleared the 200 day SMA in its base. We were looking for a test of the 200 day; when stocks break back over it, they often test it within a short period. Sure enough LRCX came back, tapped the 200 day SMA on 10-3, and then started back up on rising volume. That is what we wanted to see: a hold of support and volume coming back as it rebounded.
We moved in on 10-4 at $45.69 and also bought some January $45 strike call options for $5.40. LRCX jumped higher that session, closing at 46.98. That gave us a good gain early. It continued higher on into earnings where it announced a tripling of profits. Its forecast was disappointing but it finished the day of earnings positive. Friday it caught fire with a strong $3.27 run. Given the strong move in the market and NASDAQ approaching its post-2002 high, we decided to take some partial gain after a good move. We sold some stock for $51.32, a quick 12% gain. We sold some options for $9, a very nice 66% gain in 8 sessions. We like taking some partial gains after the first good move; it banks us some solid gain and helps keep us mentally right for the play; with money in the bank you can keep your emotions better under control to even more gains.
Learn more about "The Daily" with Stock Picks! - Issued 5 Times Per Week
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* * * SCOTTRADE * * *
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2) Stock Splits Playing stock splits can be very profitable, but it takes know-how. Our stock split service focuses on three main types of plays: 1) pre-announcement (where we forecast an upcoming split prior to the company making the announcement); 2) pre-split (these plays are made in the days leading up to the actual split day); and 3) post-split plays (plays made after the actual stock split where the stock is showing continued or renewed strength).
For post-splits, we can play them as we would pre-splits (very short term), but we prefer to stretch our horizons, playing the trend. When playing options, we look further out, 2 or more months at least. We let the trend carry us along if there is one, but we will also take profits if the technical pattern degenerates, e.g., breaks a trendline. The main difference between post-splits and pre-splits plays is that we really have to like the pattern. Pre-splits can run right before their splits even with poor technical indicators. For post-splits, we are looking at the stocks from more of a longer term "would I buy this stock at this juncture?" position. Now there are times when a hot stock splits and investors pile in to get in while the stock is 'cheaper.' We play those, but with more of a short-term, pre-splits mentality in that we will be ready to get out fast if the momentum fades.
Remember, everything we do has to pass muster with the market that day ... don't fight the market on these plays.
Listen to Stock Split Report Editor Jon Johnson's
stock split interview on CNBC-TV [ Broadband | Dial-up ]
Here's a post-split play and our current analysis.
Company Profile
STATUS: Cup w/handle. Still working laterally over the 10 day EMA (27.53) as JCOM continues forming the handle to the base. Tightening up nicely for the breakout move. To recap: Working on the handle to a 14 week base that formed after a nice breakout and run from May to early July. Made us some great money on that run. It needed a rest so it could do it again, and this base looks to have set it up for the next move. Solid money flow has turned higher as JCOM moves laterally and forms the handle. It is making a higher low this week, using the 10 day EMA (27.36) as support. That often precedes the breakout. Just waiting for volume to kick back in as it makes the breakout move.
Volume: 319.809K Avg Volume: 690.795K
BUY POINT: $28.45 Volume=1.1M Target=$33.45 Stop=$27.21
POSITION: JQF AY - Jan. $27.50c (59 delta) &/or Stock
Learn more about our Stock Split Report and how we have made gains of 321% with our powerful stock split plays!
Details Here. |
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3) TECHNICAL PLAY Company Profile
STATUS: Test breakout. Strong surge Friday as volume jumped and BITS jumped off the 18 day EMA (8.73) test. This follows the breakout from a 5 month cup with handle base in mid-September. Strong breakout, nice, low volume test, then a strong rebound starting Friday. We like to enter on these tests as they show the buyers moving back into the stock again after the breakout, still wanting it at these higher levels. Nice move to a 5 year high. Money flow is surging higher and BITS is starting to follow it.
Volume: 599.605K Avg Volume: 175.926K
BUY POINT: $9.65 Volume=200K Target=$12.55 Stop=$8.97
POSITION: - Stock (no option chain)
Learn more about our Technical Traders Report - Issued 5 Times Per Week | |
4) COVERED CALL PLAY Company Profile
Learn more about our Covered Call Tables - 8 Tables Updated 5 Times Per Week |
PREMIUM SERVICES
IH Alerts: InvestmentHouse.com's Best of The Best Plays!
Stock Split Report: Forbes.com Best of the Web
Covered Calls: 8 Tables with nightly updates - energize your portfolio!
Tech Traders: Breakouts, wedges, etc...focusing on stocks ready to move now!
The Daily: "The Daily" is a must read for all investors!
MARKETPLACE Investor's Business Daily: Complimentary subscription delivered to your doorstep!
Block All Pop-Ups! Complimentary tool from Amazon.com.
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The foregoing is commentary for informational purposes only. All statements and expressions are the opinions of Online Investment Services, LP., or Split Ventures, Ltd. This information is 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 the related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolios of writers for this issue may, in some instances, include securities mentioned herein and on the related 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. No one associated herewith receives compensation in any manner from any of the companies that are discussed in this newsletter or on the related websites.
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