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stock recommendation, stock picking
Begin Part 2 of 2
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, 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.
THE PLAYS:
Removed to a watchlist: PKI, IBIS, TUNE, ETM, CEPH, AZPN, NMTC, CREE, SERO, HD, EMLX, BRCD.
Best Plays:
1) ERTS: Making a strong move up from its 50 day MVA.
2) FHRX: Breaking out with room to run.
3) DKWD: Breaking out on strong volume.
4) MONE: A tightening pattern.
5) KANAD: Ready to move up on the strong volume.
6) AGAM: Breaking out.
7) QCOM: Looking for downside.
8) TXN: Ditto.
9) COHU: Strong volume on a move up in the handle.
New:
ERTS (Electronic Arts--$61.73; +2.58; optionable): Software
http://biz.yahoo.com/p/e/erts.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).
http://www.investmenthouse.com/ct/erts.html
FHRX (First Horizon--$30.88; +2.16; optionable): Drugs
http://biz.yahoo.com/p/f/fhrx.html
STATUS: FHRX had a super uptrend since late March, then at the top of the move corrected back to the 200 day MVA and formed a 9-week cup base. Friday the stock burst from a quick handle formation as volume exploded to 1.4 million (avg. 328,000), closing just under the previous high in the base at 30.90. Buy point was 29.88, so FHRX remains a buy up to 31.37. Money flow and buying look good. Target: 36
BUY POINT: Over 30.90 on continued strong volume. Stop: 28.78(7%)
POSITION: Stock and/or April $30 calls to buy (FUF DF). Delta unavailable.
http://www.investmenthouse.com/ct/fhrx.html
DKWD (D&K Healthcare--$58.18; +3.17; no options): Drugs wholesale
http://biz.yahoo.com/p/d/dkwd.html
STATUS: Broke out of an ascending wedge in late October then quickly formed an 8-week cup with handle. The stock broke out of this most recent pattern Friday on solid volume of 130,300 (avg. 118,590). Buy point was 56.13, leaving the stock a buy up to 58.94 on this move. It closed right at its intraday high on the pop in volume, so is a strong move. Decent money flow and buying. Target: 67.
BUY POINT: Over 58.18 on continued strong volume (179,000+). Stop: 54.11 (7%)
POSITION: Stock.
http://www.investmenthouse.com/ct/dkwd.html
MONE (Matrixone--$13.00; -0.44; optionable): Internet Software
http://biz.yahoo.com/p/m/mone.html
STATUS: MONE crossed back over its long-term down trendline eight days ago (the trendline connects the August 2000, January, February and June highs), off the October lows in its 22-month base. Currently the stock is being squeezed between the 200 day MVA (above at 13.82) and the lower 10 day MVA (12.27) in a flying plateau-type pattern as a test of the strong move (MONE hasn't actually touched that lower support since 8 days ago). Volume was strong Friday (647,500; avg. 745,000) on another attempt to move over the 200 day MVA. The stock may tap the 10 day (which coincides with a short term up trendline) before making the breakout over the resistance, but that could happen in the next day or two. Money flow looks good and buying strong. Initial target: 17
BUY POINT: 14 on continued rising volume (in the range of 750,000). Stop: 13.02 (7%)
POSITION: Stock and/or February $10 calls to buy (MOU BB).
http://www.investmenthouse.com/ct/mone.html
VAST (Vastera--$16.10; +0.10; optionable): Information Technology Software
http://biz.yahoo.com/p/v/vast.html
STATUS: In a cup with handle (11 months) that is inside a larger, 15-month base. The stock has pulled back in the handle to support at the 18 day MVA (15.53), with volume sinking well below average (88,500; avg. 273,454). We look for a move back up in the handle after this 4-day lateral consolidation at support. Strong money flow. Target: 22
BUY POINT: Aggressive: 16.50 on rising volume. Stop: 15.35 (7%) Breakout: 18.73 on volume of 410,000 or better. Stop: 17.42 (7%)
POSITION: Stock and/or April $12.50 calls to buy (AQY DV).
http://www.investmenthouse.com/ct/vast.html
KANAD (Kana Communications--$18.46; +0.76; no options): Internet Software
http://biz.yahoo.com/p/k/kanad.html
STATUS: Deep in a 22-month base, moving along the bottom but off the lows near 3.50. The stock tried to break out of a 15-week cup base and then began forming an ascending wedge. It broke over resistance at 20 but pulled back again and now looks ready for a move up from the 18 day MVA (29.51). Aggressive players can look at taking positions on a move over the intraday high of 18.87 on continued strong volume (up to 427,700; avg. 3.5 million). Huge money flow and buying. Target: 27
BUY POINT: Aggressive: 19 on continued rising volume. Stop: 17.67 (7%). Breakout: 22.26 on volume of 4.5 million or higher. Stop: 20.70 (7%)
POSITION: Stock.
http://www.investmenthouse.com/ct/kanad.html
Some small stocks:
DSTM (Datastream--$6.41; +0.06; optionable): Technical Systems Software
http://biz.yahoo.com/p/d/dstm.html
STATUS: DSTM broke over its down trendline and the 200 day MVA (5.93) just 5 days ago in a strong volume move. The stock had gapped up and over the down trendline but may not fill the gap if it holds support at the 200 day. It has moved laterally for three days, showing dojis, and Friday got a strong dose of volume on a move up from a tap of support near 6. The stock didn't move much on the volume spike but showed a hammer doji (250,900; avg. 79,000), and the spike is bullish. Look for a breakout over the December high at 6.61. This current pattern can be a handle to a 6-month cup base. Money flow and buying excellent. Target: 8
BUY POINT: 6.65 on continued strong volume. Stop: 6.18 (7%)
POSITION: Stock and/or February $5 calls to buy (DQK BA).
http://www.investmenthouse.com/ct/dstm.html
AWRE (Aware--$8.04; +0.23; optionable): Business Software
http://biz.yahoo.com/p/a/awre.html
STATUS: A strong move over the 200 day MVA (7.19) in a cup with handle base of 7 months (within a larger 22-month base). The stock pulled back to a test of the 10 day MVA at 7.59 then bounced Friday, with volume falling back down to average levels (166,600). Looking for a move back up, perhaps after another day or two of consolidation in the handle, and breakout over the December high (8.63). Excellent money flow and buying. Target: 11
BUY POINT: 8.76 on volume of 250,000 or higher. Stop: 8.15 (7%)
POSITION: Stock and/or April $5 calls to buy (WUQ DA).
http://www.investmenthouse.com/ct/awre.html
AGAM (Acres Gaming--$5.29; +0.47; no options): Computer Peripherals
http://biz.yahoo.com/p/a/agam.html
STATUS: Broke out Friday from a rolling pattern it had formed after failing to break out of a 4-month double bottom with handle back in November. Volume was very strong both Thursday and Friday with the stock taking out strongest resistance at the 5 level, though AGAM closed just under the November high at 5.43. Look for a continued breakout and move over that high. Our target will be the highs at the start of AGAM's 8-month base near 7. Good money flow and buying. Volume was a high 259,400 (avg. 63,000).
BUY POINT: 5.45 on continued strong volume. Stop: 5.07 (7%). A technical buy up to 5.39.
POSITION: Stock.
http://www.investmenthouse.com/ct/agam.html
New Puts:
KLAC (Kla-Tencor--$51.31; +0.75; optionable): Semiconductor
http://biz.yahoo.com/p/k/klac.html
STATUS: Forming a head and shoulders pattern with a neckline just above its 50 day MVA (49.31). The stock has held that support over the last week, ever since it sold down seven days ago, and with volume rising all week made a move back over the 18 day MVA Friday, but ended the day with a doji just under that resistance. Volume remains well below average at 3 million (avg. 9.1 million). Now this pattern has not been completed, so we don't want to rush it unless we know we are getting into an aggressive play. We are looking for a move back down and break of support for a breakout from the pattern. Target: 42-40
BUY POINT: 49 on volume of 4 million or higher.
POSITION: February $60 puts to buy (KCQ NL).
http://www.investmenthouse.com/ct/klac.html
QCOM (Qualcomm--$51.80; -0.40; optionable): Telecom
http://biz.yahoo.com/p/q/qcom.html
STATUS: QCOM has traded below the 50 day MVA (54.66) for over 2 weeks, and from support at the 50 range moved up over the last few days with volume low but rising (Friday at 7.4 million; avg. 15.7 million). QCOM tapped near the 18 day MVA (53.67) on the intraday high of 53.27 then moved back down. It is forming a head and shoulders with a wimpy right shoulder. The stock is looking weak and we expect a drop and break of support at the 50 range. Aggressive positions on a strong move down from here. Target: 45.
BUY POINT: Aggressive: 51.50 on stronger volume in market selling. Below support: 50, on rising volume.
POSITION: February $60 puts to buy (AAO NL).
http://www.investmenthouse.com/ct/qcom.html
TXN (Texas Instruments--$28.66; -0.09; optionable): Semiconductor
http://biz.yahoo.com/p/t/txn.html
STATUS: Very similar to QCOM. TXN fell below the 50 day MVA (currently at 30.24) over 2 weeks ago. It moved up from the December low near 26 and Thursday hit the 18 day MVA (resistance at 29.50), then added a slight loss Friday. Volume was higher (7.3 million; avg. 10 million) and TXN bounced slightly from support at 28, level of some price support from the last week or so. We can look at taking aggressive positions on a move through 28 on selling for potential put plays. Target: 23
BUY POINT: Aggressive: Below 28 on continued rising volume.
POSITION: February $35 puts to buy (TXN NG).
http://www.investmenthouse.com/ct/txn.html
SUNW (Sun Microsystems--$12.59; -0.22; optionable): Computer Hardware
http://biz.yahoo.com/p/s/sunw.html
STATUS: Again much like QCOM. Trying to form the right shoulder of a head and shoulders pattern. The stock moved up over the last few days, crossing over the 18 and 50 day MVAs to reach an intraday high Friday at 13.21, a level of resistance from November prices. Volume is up but still below average (40 million; avg. 52.7 million). For the put the stock needs to move back through the support of the two moving averages; at that point we will consider taking aggressive positions. Buy point for a breakout is below the December low at 11.52.
BUY POINT: Aggressive: 12.35 (50 day MVA is at 12.42) on rising volume. Breakdown: 11.50 on volume in the range of 50 million or higher.
POSITION: February $15 puts to buy (SUQ NC).
http://www.investmenthouse.com/ct/sunw.html
CONTINUED PLAYS:
BREAKOUTS:
AUDC (Audiocodes--$5.73; +0.32; optionable): Scientific & Technical Instr
http://biz.yahoo.com/p/a/audc.html
STATUS: Broke out of the ascending wedge Thursday and crossed the 200 day MVA (5.64) Friday with volume lower yet still strong at 475,500 (avg. 361,227). After crossing the major support/resistance, look for AUDC to hold the moving average on a pullback (if Monday is a light day it may take a breather on the breakout, which can set it up for another gain). Is above our limit for buying on a breakout (5.38). Look for a test of the breakout, and it might be a short one. Target: 6.75
BUY POINT: Aggressive after a pullback to the 200 day: 5.75 Stop: 5.35 (7%)
POSITION: April $5 calls to buy (XRD DA).
http://www.investmenthouse.com/ct/audc.html
TEST OF BREAKOUT:
LTD (The Limited--$14.97; +0.08; optionable): Retail
http://biz.yahoo.com/p/l/ltd.html
STATUS: Broke out of the pennant Thursday, not a strong move due to low volume, which was rising Friday to 755,100 (avg. 1.7 million) with LTD making a small move up (the stock remains a buy on the breakout up to 15.56). We look for continued rising volume in a rally, and a move over resistance at the previous 2 days' highs (15.08 and 15.10). Like the move over the 200 day MVA (14.65). Target: 18. High money flow.
BUY POINT: Over 15.10 on volume in the range of 1.3 million or higher. Stop: 14.05 (7%)
POSITION: Stock and/or February $12.50 calls to buy (LTD BV).
http://www.investmenthouse.com/ct/ltd.html
OO (Oakley--$16.59; -0.46; optionable): Sporting Goods (sunglasses)
http://biz.yahoo.com/p/o/oo.html
STATUS: Watching the stock in a test of its good move over the 200 day MVA (16.80) earlier this month; OO is moving more or less laterally along that support level with volume dropping back nicely below average. This is a handle to a 5.5-month cup base, and though OO fell below the 10 day MVA and can test the 18 day MVA (15.96) before heading back up, the overall pattern looks good (volume was lower Friday at 297,500; avg. 443,454). Most of the pattern is below the 200 day MVA, but such is the case with many stocks that are looking better. Look for a breakout over 17.86, Thursday's high. Good money flow and strong buying. Target: 22
BUY POINT: Breakout: 17.99 on volume of 665,000 or higher. Stop: 16.73 (7%)
POSITION: Stock and/or February $15 calls to buy (OO BC).
http://www.investmenthouse.com/ct/oo.html
WEDGES, PENNANTS, and FLYING PLATEAUS (AND FLAGS): These are some of our favorite patterns as the moves can be explosive. In this market, however, we need to see the move on the breakout on strong volume.
BLDP (Ballard Power--$29.40; -0.30; optionable): Manufacturing
http://biz.yahoo.com/p/b/bldp.html
STATUS: Deep in a 22-month base but off the lows (near14) and after moving back over the 50 day MVA in October. Formed an ascending wedge pattern with support at an up trendline (connecting November and December lows). Currently is holding above the 18 day MVA (29.22) on low volume (down Friday to 453,300; avg. 966,000), we look for a breakout for a run up to the 200 day MVA (36.10). Strong money flow.
BUY POINT: Aggressive: 30.20 on continued rising volume. Stop: 28.09(7%)
POSITION: Stock and/or February $25 calls to buy (DUJ BE).
http://www.investmenthouse.com/ct/bldp.html
AZPN (Aspen Tech--$16.85; +0.30; optionable): Software
http://biz.yahoo.com/p/a/azpn.html
STATUS: Still holding the lateral portion of the ascending wedge. Tried to move up Friday and tapped the 200 day MVA (17.62) but volume was even lower below average (172,800; avg. 367,000). Continue to look for consolidation above support of the 18 day MVA (16 range) for a breakout over the 200 day MVA. Target: 20. Good money flow, decent buying.
BUY POINT: Breakout over the 200 day MVA: 17.75 on continued strong volume. Stop: 16.51 (7%)
POSITION: Stock and/or February $15 calls to buy (ZQP BC)
http://www.investmenthouse.com/ct/azpn.html
BASING/TRADING RANGES:
MIL (Millipore--$60.76; +0.36; optionable): Scientific & Technical Instruments
http://biz.yahoo.com/p/m/mil.html
STATUS: Moving in a more or less lateral pattern above support of the 18 day MVA, at 60, in the handle to a 5-month double bottom pattern (part of a larger 19-month base). Made a slight move up Friday though volume was even lower below average (129,900; avg. 282,181). Nice lateral pattern; look for a breakout from it and a subsequent move over the December (handle) high at 63.36. Almost reached our aggressive buy point on the intraday high at 60.92. Target: 76. Good money flow.
BUY POINT: Aggressive: 61 on volume of 230,000 or higher. Stop: 56.73 (7%). Breakout: 63.49 on volume of 428,000 or higher. Stop: 59.05 (7%)
POSITION: Stock and/or April $55 calls to buy (MIL DK).
http://www.investmenthouse.com/ct/mil.html
COHU (Cohu Inc--$19.99; +0.18; optionable): Semiconductor
http://biz.yahoo.com/p/c/cohu.html
STATUS: Back over the 18 day MVA by the end of the week with volume rising from the previous three day's lower numbers (up to 51,500; avg. 68,000). COHU tested the 50 day MVA for 5 consecutive days until bouncing back over the 18 day Thursday, and with the stronger volume looks ready for a move up in the handle (to its 6-month cup). Money flow and buying are strong. Target: 26.
BUY POINT: Aggressive: 20.25 on volume in the range of 70,000. Stop: 18.83 (7%). Breakout: 22.06 on volume of 104,000 or higher. Stop: 20.52 (7%).
POSITION: Stock and/or February $17.50 calls to buy (QCH BW).
http://www.investmenthouse.com/ct/cohu.html
Continued Puts: We still like CLS, LLTC, SPC, PPG, and ITG. See the 12-26 report for buy points.
Good Investing!
Jon L. Johnson and your Technical Traders Report Team
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 in 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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stock recommendation
stock picking
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