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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: RI, EMLX.

Stocks/Indexes from the Wednesday report:
SGI: Continued to move laterally along the 18 day MVA. Volume still low.
VNWK: A small move up to close right on the 200 day MVA, resistance we want the stock to break. Volume lower and still below average on the move.
IBI: The down trendline held the stock down today even with volume stronger and well above average. Will watch for a test of the 10 day MVA (14.32).
KSS: Held in the lateral handle with volume still below average (and falling).
EBAY: Held above the 18 day MVA after breaking above that resistance/support level Wednesday. Volume still well below average and falling.

Continuing plays:
BZH: A tight lateral pattern the last 2 days in the handle to its 5-month base. On low volume and at the 10 day MVA. Buy point for a breakout is 77.23, with aggressive buy point considered at 73.10.
CBR: Profit-taking and a tumble to the 18 day MVA on strong volume.
EMLX: Broke out of the cup with handle on rising but still below average volume. A buy up to 43 on the breakout.
KEA: Still tight in the handle and holding the 18 day MVA.
IDXX: Up for two days and trying to break resistance in the upper right side of its 6-month cup base. Volume very low and below average, however.
INRG: Continued higher today with volume climbing, too. Buy point 14.98 (12-17)
JPM: Still threatening to break support for the put play.
RESP: Beginning to form a handle to a 2.5-month cup, showing a tight doji after some selling Wednesday. May not be ready quite yet for the move up, but we are watching it.
RI: Popped up on high volume and challenging the December high. Aggressive positions can be considered from here, or look for a move over 21.65 first.
RIMM: Bouncing from the 50 day MVA. 200 day MVA ahead at 24.50.

SUBSCRIBER'S CHOICE:

SEBL (Siebel Systems--$28.08; +0.36; optionable): Application Software
http://biz.yahoo.com/p/s/sebl.html
STATUS: SEBL made a very nice breakout move over a week ago, a strong move up to its 200 day MVA (currently at 31.08). From a halt at that resistance, the stock has pulled back in a tight pattern, and volume has finally dropped back below average (very low Christmas Eve) but rising the last 2 sessions (up Thursday to 13 million; avg. 18.2 million). Showing a tight doji now just up from a tap at the 10 day MVA (27.54; intraday low was 27.70), SEBL looks ready for a move back up. The 200 day MVA will pose some resistance, but we look for the stock to break through that on strong volume in a rally. SEBL is off the lows (just above 12) in its 14-month base. Good buy and money flow. Target: 37
BUY POINT: Aggressive: 28.50 on continued rising volume. Stop: 26.51 (7%). Break of resistance: 31.20 on volume of 18 million or higher. Stop: 29.02 (7%).
POSITION: Stock and/or February $25 calls to buy (SGQ BE).

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

Best Plays:
1) MCTR: A solid move up on strong volume.
2) NABI: Strong move out of a lateral-type price pattern.
3) KSWS: Another dose of strong volume pushing price higher.
4) NTAP: Nice cup with handle.
5) TARO: Looks ready to bounce from the 18 day MVA.

New: We really like some of the moves coming out of the small stocks.

MCTR (Mercator--$8.26; +0.46; no options): Business Software
http://biz.yahoo.com/p/m/mctr.html
STATUS: MCTR is in an 11-month cup with handle base (previous high near 12) that is part of a larger base of almost 2 years. After pulling back in the handle to support at the 18 day MVA, the stock Thursday bounced solidly with volume exploding above average (from very low levels) to 936,400 (avg. 526,000). Look for a continued move up and breakout over the handle high (December) at 9.44. MCTR has excellent money flow and buying. Target: 12
BUY POINT: Aggressive: 8.40 on continued strong volume. Stop: 7.81 (7%). Breakout: 9.57 on continued strong volume (minimum breakout volume is 790,000). Stop: 8.90 (7%)
POSITION: Stock.

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

Previously covered:

NABI (Nabi Inc--$10.80; +0.56; optionable): Biotechnology
http://biz.yahoo.com/p/n/nabi.html
STATUS: NABI is in a long base dating from 1996, but more recently the stock broke out of a cup with handle base of 16 months. It tried to extend the move the next day but fell back and moved more or less laterally above support (at 10) for almost a week, testing the breakout. Like a diver testing the spring board, NABI tapped the 10 day MVA both Wednesday and Thursday, launching from that support today as volume broke well above average (744,500; avg. 207,000). This is a strong bounce from the 10 day MVA and we are looking for a continued move. Often the case is that a stock can post higher gains after testing the breakout. We will look for that action here. Huge money flow and buying. Initial target: 13
BUY POINT: Aggressive: 11 on continued strong volume. Stop: 10.23 (7%)
POSITION: Stock.

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

KSWS (K-Swiss--$33.43; +1.09; optionable): Consumer non-durables
http://biz.yahoo.com/p/k/ksws.html
STATUS: Tried to hold the breakout from the 22-week cup with handle but instead tested back to the 18 day MVA and then lower price support at the 32 level (November highs), in another, better-looking handle. With volume falling below average the previous 2 days, the stock held that support and used it for a solid move up Thursday as volume broke strongly above average (110,100; avg. 86,409). KSWS bullishly moved back over the 18 day MVA (33.28), and we look for a continued climb from here. Money flow is strong and buying improving. Target: 41
BUY POINT: Aggressive: 33.65 (over the 10 day MVA at 33.59) on continued strong volume. Stop: 31.29 (7%). Breakout: 35.95 on continued high volume. Stop: 33.50 (7%)
POSITION: Stock and/or April $30 calls to buy (SWU DF).

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

A tech stock that is looking good:

NTAP (Network Appliance--$22.47; +0.32; optionable): Hardware: Data Storage
http://biz.yahoo.com/p/n/ntap.html
STATUS: NTAP has formed a handle to a shallow cup base of 8 months (previous high at 29.50). The handle developed on a pullback from the December high of 24.53, after NTAP made a super run from the first of the month, breaking over its 200 day MVA (currently at 15.90). Showing three dojis on low volume just above the 10 day MVA (21.98), the stock is looking ready for a move up, and we look for a breakout over the handle high (24.53) when the stock rallies. Volume Thursday was still quite low but just higher at 4.6 million (avg. 12 million). NTAP shows excellent money flow and buying, not to mention a nice-looking pattern. Target: 30
BUY POINT: Aggressive: 23.25 on volume of 6 million or higher. Stop: 21.62 (7%). Breakout: 24.66 on volume in the range of 18 million. Stop: 22.93 (7%)
POSITION: Stock and/or February or March $20 calls to buy (NUL BD or CD).

http://www.investmenthouse.com/cd/ntap.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, MIK, BMET, APPB, LOW, IDPH, TARO, MYL, IGT, VRSN

TARO (Taro Pharmaceuticals--$41.07; -0.19; optionable): Drug Manufacturers
http://biz.yahoo.com/p/t/taro.html
STATUS: The stock is in a base of 22 weeks, a base comprised of a double bottom with handle and attempted breakout (did not take out the previous closing high at the start of the base, 48.50), and a subsequent correction to the range of the 200 day MVA. The stock recovered back up to its down trendline (connecting July and October closing highs), from there pulling back on steadily decreasing volume (184,800; avg. 739,409). Finally at support, the 18 day MVA, and showing a star doji at the bottom of the pullback, TARO looks ready for a move up. Looking at an initial target at the range of the October high (near 45). The stock has good money flow, and buying is decent, looking better.
BUY POINT: Aggressive: 41.30 on continued rising volume (in the range of 250,000). Stop: 38.41 (7%)
POSITION: Stock and/or February $37.50 calls to buy (QTT BU). No open interests.

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

IGT: Another new high. It won't stop for now.
IDPH: Has formed another ascending wedge as a handle. Not the best kind of handle, but a buy point for a breakout is at 73.45.
CACI: A solid move up with volume breaking above average. Ready to break to a new all-time closing high.

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

KKD: Surged again today in its breakout from the 6.5-month base.

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

BRCM: Back over the 50 day MVA Thursday despite even lower and far below average volume.
PXLW: Back at the 50 day MVA and now may be ready to start a move back up. May hold here for a few days before making the move.

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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