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Weekend Newsletter for
November 12, 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
Mixed open, positive close, not much change.
- Buyers win the rubber match but it doesn't change much.
- Battle of economic beliefs has the first shot fired Friday.
- Founding Fathers would try again.
- Its growth versus tired NYSE large caps as growth leaders try to set up for a rebound.
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Market Summary (continued)
The score was 1 to 1 post-election. Wednesday the market overcame the 'surprise' win of Senate control along with the House and posted a solid upside session. Thursday strong CSCO earnings tried to keep the run going with a big gap higher. Harsh reality started to creep back in, however, as investors envisioned the adverse economic impacts coming when the pleasant talk leading up to and immediately after the election inevitably gives way to the same old agendas we all know the parties still seek to push. Friday stocks rebounded to close out the week positive. An endorsement of the action? The market has not really made its decision yet.
Friday there were plenty of positives to try and help pick the market back up from the Thursday selling. The IEA forecast lower oil demand for 2006 and 2007, and that helped push oil right back down after its Thursday jump over $61/bbl (closed at 59.59, -1.57). Oil is extremely volatile day to day, but it is volatile within a range with 57ish on the low and 61ish on the high. Friday it was down again, and as it faded stocks fared better after a soft open. Earnings were also positive with KSS, DIS, AIG and NVDA all beating the street. BA received a $10B helicopter contract. DNA bought TNOX. Once more all of the elements investors like to see cropped up again.
The good news had its counterparts. China announced it was going to diversify out of its dollar holdings (it holds an estimated $1T in dollars) into euros, oil, gold, etc. The dollar matched the August lows while bonds rallied, driving yields lower yet again (4.73% two year, 4.59% 10 year). Suddenly the 10 year is back near 4.5% as bonds continue to bounce up and down similar to the dollar. In addition to China, Clinton's old Treasury Secretary was again espousing its strange view of how the economy works, proffering that taxes could be raised without affecting the economy, and indeed calling for democrats to raise taxes. More on this later.
Read "The Daily" Entire Weekend Summary
Here's a trade from "The Daily" and insights into our trading strategy:
Company Profile
The stocks of various exchanges whether energy, stocks, commodities or otherwise have been hot. When money is heading into a sector you look for opportunities in the form of good patterns that are ready to make those explosive moves higher. NYX is such a stock and we were watching it in late October as it worked on the handle to its 8 month cup with handle base, a solid pattern that often yields a strong breakout and run higher. On 11-2-06 it started higher on a jump in above average volume and we put it on the report.
The next day it continued higher and we moved in with some stock at 77.10 and some January $75 call options for $6. We always like call options, particularly on higher price stocks as that gives us leverage for bigger gains as the stock breaks higher. Well, NYX did not disappoint in breaking higher. We moved in at $77 and it closed at $81 that day. A modest gain the next session and then a two-day sidestep to take a breather after the big initial surge. No problem there because volume fell well below average as it rested. It was worth the short rest because NYX exploded higher for 5 points the next session and then $7 on Friday. With such an explosive move we decided to take some gain off the table, selling some stock for $96 (a 24.5% gain) and some options for $13 (a 260% gain). No complaints for just 6 sessions in the play.
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: Double bottom w/handle. Still hugging the 10 day EMA as it completes the handle and sets up the breakout. Another steel stock that likes it on top. Thursday it jumped on strong, above average volume; looks ready, and just has to show us the move that sticks. To recap: Volume jumped above average Thursday as CMC tried the breakout move from its 6 month base and toward a new all-time high. It could not close the deal Thursday as it broke higher but closed off its high at 27.81. Looking for it to continue higher on strong trade.
Volume: 1.078M Avg Volume: 1.217M
BUY POINT: $27.52 Volume=1.8M Target=$32.95 Stop=$26.38
POSITION: CMC CE - Mar. $25c (63 delta) &/or Stock
Learn more about our Stock Split Report and how we have made gains of 321% with our powerful stock split plays!
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3) TECHNICAL PLAY Company Profile
EARNINGS: Announced 10-31-06
STATUS: Cup w/handle. Nice doji Friday at the 18 day EMA (56.99) on very low volume as CMG puts the finishing touches on its handle. Excellent action from this stock and looking for the breakout to put some more spice into it. To recap: A new issue in January, the current 6 month base is its first real consolidation. After earnings it gapped lower to the 18 day EMA Thursday and Friday to finish the week, showing a pair of dojis on the candlestick chart at that point. Looking for it to regroup at this level and then show us the breakout move.
Volume: 425K Avg Volume: 973.212K
BUY POINT: $57.65 Volume=1.4M Target=$66.98 Stop=$55.45
POSITION: CMG CK - Mar. $55c (60 delta) &/or Stock
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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