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Begin Part 2 of 4
Support and Resistance
Nasdaq: Closed at 1987.26.
Resistance: Held over 1980 (the gap up point). The next level is more a psychological one at 2000, but the December high at 2010.91 is the point to beat for now. After that the down trendline is at 2055, in conjunction with the up trendline for now.
Support: 1980 gap up point would be great if the techs could hold there and build higher; big if. On any test, we really look for the 1934 to 1941 level to hold, backed up by the 200 day MVA (1926.50). After that the 50 day MVA is at 1898.92.
S&P 500: Closed at 1161.02.
Resistance: The 200 day MVA at 1167.10 still looms as the key resistance to beat. Then the December high at 1173.62.
Support: 1150 is where we want it to hold, but the break over that level was not strong last week. After that the 50 day MVA is at 1131.98 and former price consolidations at 1125. After that, 1100 is next (top of the October consolidation range).
Dow: Closed at 10,136.99.
Resistance: Still holding above the 200 day MVA (10,092.10), but has not pulled away from it definitively. The December high is next at 10,169.44. The up trendline is at 10,300
Support: The 200 day MVA is what we want to hold (10,092.10). 9992 is next, but it has not held with much consistency. The 50 day MVA is at 9818.91. After that, 9500.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
1-2-02
Auto Sales, December (8:30): 6.1M versus 6.3M prior.
Truck Sales, December (8:30): 7.8M versus 8.2M prior.
NAPM Index, December (10:00): 45.8 versus 44.5 prior.
1-3-02
Initial Claims; December (8:30):
Construction Spending; December (10:00): -0.1% versus 1.9% prior.
1-4-02
Nonfarm Payrolls; December (8:30): -175K versus -331K prior.
Unemployment Rate; December (8:30): 5.8% versus 5.7% prior.
Hourly Earnings; December (8:30): 0.3% versus 0.3% prior.
Average Workweek; December (8:30): 34.1 versus 34.1 prior.
NAPM Services; December (10:00): 50.3 versus 51.3 prior.
SUBSCRIBER QUESTIONS
Q: When you talk about buying aggressive point like on MCTR 8.40, is this at the 18 day MVA and is the next [buy point] at 9.57 a break above the 200 day SMA? Also you mention that you wait to buy usually after the first hour of trading; is this a good rule to follow, and do you ever buy pre-market?
A: there is not any set 18 day MVA or 200 day MVA label on buy points that are called aggressive or breakout. When we use the aggressive label, the stock is usually making a test of a recent move and is starting up off of the support; it is more aggressive because the stock still must clear that recent high to make a really good move. With MCTR it had made a strong move in early December and then pulled back to the 18 day MVA, bounced higher and then moved laterally until it ran into that level again and bounced on very strong volume Thursday (when market volume overall was still low). It was aggressive because it was still below the December high (the high point in the handle), and a move can fail before it ever breaks out. Still we liked it enough that we wanted to catch the bounce up off the 18 day MVA. The next buy point was over the handle high, the true breakout of the pattern that started back in January of 2001.
We usually do wait to buy into positions until a half hour to hour has passed unless we get some news that we really like (e.g., company raises its owns earnings outlook). If a stock gaps up or down on that news, we still won't go out chasing it, but will wait and let it come back to us. That is usually why we wait. The first half hour to hour market makers, specialists, buyers, and sellers are in a tug of war to see what the direction for a stock and the overall market will be. Strong opens usually lead to a pullback to at least test the move, and weak opens give rise to good moves a bit later. We don't want to be the guinea pigs in setting the price for the day. Let it get a bit established and then move in when we see the direction. As for buying pre-market, we will do that when we have the kind of news we want and can still get what we feel is a reasonable price. The problem with the pre-market is wider spreads and fewer participants, so it is hard to get a real handle on what the stock will do; if the news is good, the stock may be up $2, but then pullback to test that move in the first half hour to hour of the regular session. Again, we are acting as the guinea pig.
TEAM TRADES
We did partake in an aggressive position on MCTR Friday (a Daily play), letting it rally up early over the buy point of 8.40 (it ran quickly to 8.55), and then picking it up after it pulled back to 8.42 and tested that move. We still waited a bit to go after it, and it ran 8.62 but then pulled back to 8.45 again. At that point when it started to move up again we were very interested and went after the stock. It rallied to 8.70 and we were feeling as if we got a good entry point: tested the 8.40 entry point and after we got in, rallied to a session high. It tested one more time, however, in an up and down session, but managed to close at 8.55 on the official count. Now we did not take full positions because it was ahead of the breakout; when it makes its breakout move we will then add to or complete our buy on the position. On aggressive positions we rarely put in all of our allocated funds at that time.
XRAY was a good mover (and there were many good movers Friday on the report), and is a pre-split that we saw start to make a move off of the 18 day MVA Thursday. That got us very interested, and the stock was moving early. On this one we were waiting for it to clear its recent high and the excellent volume it was showing was a nice bonus for a pre-split move. It hit the target at 10:00 CT, but we held off to let it test the move as it had made a strong run to that point. It pulled back, tested the prior high that session, and started back up. We entered at that point as volume was very solid already. Looking for a move up to 54, and the heavy volume on the otherwise lazy session was great.
THE PLAYS: XRAY continued its pre-split move!
BONUS PLAYS: CYTC is still looking good in its pattern.
GGG (Graco--$38.60; +0.75; optionable): Diversified machinery.
http://biz.yahoo.com/p/g/ggg.html
STATUS: GGG made a nice breakout from a 'flying w' with handle pattern in mid-December, and after coming back to test the move (and its 10 day MVA, at 37.29), the stock has taken a nice bounce back up. Friday it moved back over the breakout high (37.95), taking out that level on huge volume of 183,200 (average 67,000). At a new high, and we are looking for more. Solid buying. Target: 44.
BUY POINT: 39 on continued strong volume. Stop: 36.27 (7%; 18 day at 36.62).
POSITION: Stock and/or February $35 calls to buy (GGG BG - under 100 open interest).
CFBX (Community First--$26.97; +0.82; optionable): Regional bank.
http://biz.yahoo.com/p/c/cfbx.html
STATUS: CFBX has been on a steady upward trend the last two years, rising from the 13 level. It broke from a double bottom with handle this month, but after quickly coming back to test the move, CFBX held just under its 18 day MVA (25.96) and mounted a strong comeback the last two sessions. Friday it moved up on very solid, increased volume of 184,400 (average 108,500), closing just over its prior breakout high of 26.94. With the solid spike in volume, we are looking for CFBX to continue up from here with a target of 30.
BUY POINT: 27.25 on continued strong volume. Stop: 25.34 (7%; 50 day at 25.29).
POSITION: Stock and/or February $25 calls to buy (QSJ BE).
MSM (MSC Industrial--$20.21; +0.21; no options): Wholesale industrial equipment.
http://biz.yahoo.com/p/m/msm.html
STATUS: MSM has made a good recovery from its September low at 14, and in early December broke out of a 'flying w' with handle pattern, a strong move that took MSM back over its August highs at 19. Since that breakout the stock has pulled into a tight, lateral consolidation, facing resistance at 20 while holding its 10 day MVA (19.93) to close. After several dojis MSM tried a move Friday, tapping 20.43 (just over its prior consolidation high at 20.40), but pulled back to close, moving on low volume for the sessions (down to 39,500; average 64,700). We could see another test of the 10 day, but we are looking for an infusion of volume (we got some nice volume spikes before this week) to push the stock back out of the consolidation. Target: Initially, watching the 2000 high at 23.25.
BUY POINT: 20.55 on volume of 90,000. Stop: 19.11 (7%; 18 day at 19.67).
POSITION: Stock only.
INTU (Intuit--$43.07; +0.64; optionable): Computer Software.
http://biz.yahoo.com/p/i/intu.html
STATUS: INTU likes to run in Q1 and Q4 ahead of tax time, and is setting up well for a run in the new year. It has fought back to the range of March highs, showing something of an ascending wedge. It has been using the 50 day MVA (currently 41.36) as support as it makes higher lows since bouncing up from that support in mid-October. It has resistance at 45-47 where it has posted its recent highs (the range of its March high), and over the past several sessions it has held over the 50 day at its low after dropping back from its last bounce (which hit 45). From here we are looking for a move over that high with some strong volume to start its next run. Target: 55.
BUY POINT: 45.12 on volume of 160,000 (average 118,600; Friday 1.26 million. Stop: 41.96 (7%).
POSITION: Stock and/or April $40 calls to buy (IQU DH).
NEW PRE-ANNOUNCEMENT PLAYS:
STU (Student Loan--$80.62; +0.16; no options): Researching a date, as due for a split.
http://biz.yahoo.com/p/s/stu.html
BACKGROUND: Based upon our research it does not appear that STU has ever split its stock. The annual shareholder meeting was on 5-16-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: STU broke over its April and August tops last week with a very solid move. STU has been steadily trending back up from its September lows (where it found support from its May-June lows), moving along its 10 day MVA (80.07). It pulled back this week, testing the prior highs but holding strong over them and the 10 day. Friday saw a loose doji over support, with volume spiking up to 30,400 (average 11,600), and that pattern indicates a possible bounce. On that move we will see how it handles the breakout high of 83.68, targeting 90.
BUY POINT: Over 81 on continued strong volume. Stop: 78 (18 day MVA at 79.10).
POSITION: Stock.
AROW (Arrow Financial--$29.71; +0.46; no options): Working on a date.
http://biz.yahoo.com/p/a/arow.html
BACKGROUND: Last announced a 5 for 4 split on 9-22-99 at a stock price of $26. The annual shareholder meeting was on 5-09-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: AROW has moved well, almost doubling in price from last December to August. Since August, AROW has tried the 30 level several times, dipping back to find support roughly at the 50 day MVA (currently 28.70), making higher lows along the way. The higher lows and consistent highs make for a nice ascending wedge pattern, and AROW made a great move back up Thursday after again testing below the 50 day. Friday it continued up, although on much lower volume (9,300; average 12,500). It could need a bit of a rest before a continued move, but we are watching for a breakout for new positions. Target: 35.
BUY POINT: 30.12 on volume of 19,000. Stop: 28.01 (7%).
POSITION: Stock.
PRE-ANNOUNCEMENT PLAYS FOR THIS WEEK: Not looking at dates until January (tentatively DIAN 1-17 and JCI 1-18).
BEST PLAYS: Besides the plays set forth below as best plays, there are some other stocks that also look good. These include Pre-Announcements JCI; Pre-Splits CHS, SYMC and VAR; Continuing Candidate TJX; and Post-Splits CBH and FMBI.
MARKET FAVORITES BEST PLAYS: PSFT is still looking solid, and INFA started a move.
1) ARBA - Haven't heard from this one in a while
2) FISV - Looking strong
3) ERTS - Nice 50 day MVA bounce
4) ITWO - An old friend breaking out
ARBA (Ariba--$6.12; +0.59; optionable): Internet software.
http://biz.yahoo.com/p/a/arba.html
STATUS: Deep in its base, as are many of the old tech favorites, but ARBA has made some nice moves of late in a good pattern. The internet is stirring. It broke from a cup with handle in early December, hitting 7.33 before pulling back to test near the 50 day MVA (4.76). That was below the prior breakout point of 5.50, but it quickly recovered to that range and then took off Friday, making a nice move on sharply higher volume of 12.5 million (average 7.75 million). A nice move, and we are looking for the momentum to continue and carry it to the breakout high, which will be our initial target.
BUY POINT: Momentum: 6.40 on continued strong volume. Stop: 5.95 (7%).
POSITION: Stock and/or February $5 calls to buy (IRU BA).
FISV (Fiserv--$43.62; +0.80; optionable): Business Software
http://biz.yahoo.com/p/f/fisv.html
STATUS: A former candidate that has split and now ready to move again. FISV has been solid through it all over the past year, and FISV is trending up along its short-term MVA's since breaking from a cup with handle in early December. After powering up last week after a test of the breakout, FISV has come back to test the 10 day MVA (42.86) and the left-side highs of the cup (from late-June). After a hard initial drop, it held that support on lower volume, and Friday bounced back up with a nice move (volume up to 1.56 million; average 1.33 million). Looking for a continued move up and over the recent high of 44.61. Target: 49.
BUY POINT: Aggressive: Over 44 on continued strong volume. Stop: 41. Over the high: 44.73 on continued strong volume. Stop: 41.60 (7%)
POSITION: Stock and/or March $40 calls to buy (FQV CH).
ERTS (Electronic Arts--$61.73; +2.58; optionable): Software
http://biz.yahoo.com/p/p/pki.html
STATUS: ERTS broke out over its down trendline (connecting May, July, October and November highs) in late November for a nice breakout run up to the December high 66.92. It pulled back to the 50 day MVA for three weeks then bounced from the support Friday on rising volume (2.4 million; avg. 3.2 million). Looking for a move back up to the breakout high for an initial target. The stock pulled back below the May high (at the start of the down trendline), but we like the hold above the trendline and the 50 day MVA. Money flow and buying look good.
BUY POINT: 62.25 (over the intraday high) on continued rising volume. Stop: 57.89 (7%)
POSITION: Stock and/or March $55 calls to buy (EZQ CK).
ITWO (I2 Technologies--$7.79; +0.81; optionable): Application Software
http://biz.yahoo.com/p/i/itwo.html
STATUS: On the floor of a 22-month base, just off the lows near 3 (from September and October). The stock broke out of a pennant-type pattern Friday on a strong volume surge (to 17.7 million; avg. 13.4 million), buoyed by a strong current quarter forecast by Manugistics. The stock remains a buy on this move up to 8.17 (buy point 7.78). We are looking for a shorter term trade up to 10, or higher at the 200 day MVA (12.05). Decent money flow and buying.
BUY POINT: 7.80 on continued strong volume. Stop: 7.25 (7%)
POSITION: Stock and/or February $5 calls to buy (JQ BA).
PRE-ANNOUNCEMENT BEST PLAYS
1) DRI - Still in the handle
2) GNSS - Setting up a good pattern
DRI (Darden Restaurants--$36.14; +0.14; optionable): We are working on a date.
http://biz.yahoo.com/p/d/dri.html
BACKGROUND: Based upon our research it does not appear that DRI has ever split its stock. The annual shareholder meeting was on 9-20-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Still waiting. DRI has made two big moves this month, and it has made a nice pullback to support (the 10 day MVA at 35.54) since the last move. Holiday volume has been low as the stock holds over the 10 day, showing another loose doji Friday on volume of 385,600 (average 699,000). Decent action as the stock consolidates after the recent move. Looking for DRI to build strength as it moves up toward the high and beyond. Target: 43.
BUY POINT: 37.59 on volume of 1 million. Stop: 34.96.
POSITION: Stock and/or April $35 calls to buy (DRI DG).
GNSS (Genesis Microchip--$67.10; -1.46; optionable): Semiconductor. Working on a date.
http://biz.yahoo.com/p/g/gnss.html
BACKGROUND: Based upon our research it does not appear that GNSS has ever split its stock. The annual shareholder meeting was on 9-20-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: After its solid run in late-November and early December, GNSS pulled back, but after some initial hard selling, it caught firm support at the 18 day MVA (64.02), never giving us the quick put chance. It made a move back up from the 18 day on weak holiday volume, Friday pulling back slightly but holding the 10 day (66.22) as volume remained quite low (1.57 million; average 2.5 million). There has been good accumulation on this stock of late, and volume can kick in on this one at any time, so we are looking back to the upside. We will look for strong volume to push GNSS back over the recent high of 70.91. On that move, a target of 80 initially.
BUY POINT: Over the high: 71.03 on above average volume. Stop: 66.06 (7%). Aggressive: Over 69 on above average volume. Stop: (64.17).
POSITION: Stock and/or March $65 calls to buy (QFE CM).
End Part 2 of 4
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