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SUBSCRIBER QUESTIONS

Q: Could you tell me how I can use your advice to the best advantage since: I have a full time job and cannot do day trading. I usually review info in the morning before I go to work and can make trades then. Most of your advice however, is based on the stock getting to a certain price and with a certain volume. Is there a way I can place trades in advance based on that criteria?

A: I am not a day trader either, though I do day trade the indexes daily sometimes. What I try to stress (and am not going a good enough job at) is that using the methods where you let the stock break out of a pattern or above a definite resistance point allows you to enter positions with more confidence and without having to be watching the market all of the time. The idea is to let the stock prove to us it has the strength to warrant investing in. This is the method I developed while working full time in a law office where my life was spent in 6-minute increments, working 16-hour days. I did not have internet access, would be in court, or otherwise indisposed. So, I had to come up with another plan of action.

What I would do (and still do) is come up with a game plan the night before or the morning of the session. I would get together a sheet of my most important information: key points on the indexes for support and resistance; the stocks I was interested in; the key details about those stocks (pivot point; support; resistance; average volume; target volume; options I wanted (if any). I used a full service broker, and I used an online broker as well. When I was buying a breakout stock, I would often enter a buy order at the pivot price; not the full position, but part of it. When I had a break, I would call in and see if it was executed (you can get a page now). Otherwise, I would call the full service broker in the first hour on a break, and have my sheet there to let me know at the moment if things were on track. I would check over lunch to see what was going on. Later in the session (last hour), I would call the full service broker and see how things were going then. If my stocks were moving as anticipated, holding over the breakout on good volume, etc., I would add to the position taken earlier in the session. Now that I could not do that over the internet; I had to do it with Schwab, Ameritrade, Smith Barney. Still, even when I could not check in later that session, if the stock performed well and I wanted more shares, I could enter another order to buy shares the following session, keeping in mind I did not want to chase shares too far.

It is important to remember that the volume figures are not absolute guidelines. If it is off a bit that does not break a play. A breakout or breakdown on strong volume is what we want, but we won't know the final tally until it is a final tally. We try to pick good patterns that give good entry points if the price is broken. We will buy on those moves; we then check to see if volume is there, either that afternoon or that night. If it was not, we know that the move was not that strong and could come back on us; we set stops loss points closer to avoid a reversal on us as the buyers just were not there in masse on the breakout. If you have access to a pager, the alert service sends you the data on the stock as the move is made, and as discussed below, helps take much of the uncertainty out of the process.

TEAM TRADES

Today was a session we were skeptical of to begin with, and with the early gap higher, we were even more skeptical. Thus we were comfortable in waiting as long as we needed to let the indexes and stocks sort themselves out before committing funds to the market. When all else fails, patience is the key. As noted in the summary, as the early afternoon wore on, we noted a pattern of good volume in some leading names. The indexes were moving off of their lows but had run into a bit of resistance with two hours to go. It looked to us as if there would be a bit of a pullback and then an attempt to rally stocks home. We issued an alert to that effect, looking at BRCM, EMLX, etc. We watched and then in the last hour it started happening fast. IBI had already broken out, but pulled back nicely to test the move, and was trading on excellent volume. We issued the alert and stepped in at 15.42. EMLX was next as it hit 42.10 on strong volume. We stepped in at just below that level as it came back on us a bit, but it was a solid move on great volume. Then BRCM cleared a bit of intraday resistance at 43.25. We sent the alert and got in at the ask at 42.39. It ran up to close at 44.44. Then TUNE turned up and cleared intraday resistance at 24.95. We caught that one just over 25. It made a nice move into the close, closing at 25.98.

Today was a day of patience, knowing what we wanted to see to get us to take those upside positions, and waiting for that to happen. When it did we sent the alerts and acted. Volume was good on all of the stocks, and in this market that has yet to prove itself one more time at this level, that is what we want.

PLAYS TO LOOK AT:

BONUS PLAYS:

DCOM (Dime Community Bancshares--$27.85; -0.21; optionable): Savings & Loan.
http://biz.yahoo.com/p/d/dcom.html
STATUS: DCOM has formed a nice cup with handle since August (left side high 30.64). It has made a solid move up the right side, making a high of 29.05 before dipping back the past week. It tested its 18 day MVA (27.49) before recovering today, and we are looking for a move back toward the handle high and breakout. Targeting 33.
BUY POINT: Breakout: 29.17 on volume of 108,000 (average 72,000; today 40,800). Stop: 27.13.
POSITION: Stock.

CEY (Certegy--$35.20; +0.98; optionable): Business Software.
http://biz.yahoo.com/p/c/cey.html
STATUS: Looking solid in its cup with handle, formed since early September. It has dropped back the last week, holding the 10 day MVA (34.26) on the nice, low volume we like to see in a handle. Today it reached down to the 18 day (33.43) but reversed and climbed up on sharply higher volume (197,400; average 245,200). The handle high is just ahead at 35.45. Target: 40.
BUY POINT: Breakout: 35.57 on volume of 365,000. Stop: 33.08 (7%).
POSITION: Stock and/or April $30 calls to buy (CEY DF).

MARKET FAVORITES:

NTAP (Network Appliance--$23.78; +1.91; optionable): Computer hardware.
http://biz.yahoo.com/p/n/ntap.html
STATUS: NTAP has held support in the handle to its 7-month cup with handle, tapping the 18 day (21.51) Monday but making a solid move up today. Volume was still not what we have been looking for on a move, but it continued to increase, coming in at 8.22 million (average 11.8 million). Still looking for volume to kick in on the way to a breakout. The handle high is 24.53. Target: 30.
BUY POINT: 24.65 on volume of 17.5 million. Stop: 22.92 (7%).
POSITION: Stock and/or March $22.50 calls to buy (NUL CX).

TLGD (Tollgrade--$33.31; -0.04; optionable): Telecommunications.
http://biz.yahoo.com/p/t/tlgd.html
STATUS: TLGD is tightening in an ascending wedge as it forms the right side of its seven month cup. It has made some consistent highs in the 34 range while holding support at the short-term MVA's (18 day at 32.49). The stock has shown three consecutive dojis over the 18 day, with volume remaining below the average at 151,000 (average 198,000). Looking for a breakout over the recent high of 34.55. Target: 40.
BUY POINT: 34.67 on volume of 270,000. Stop: 32.24 (7%).
POSITION: Stock and/or February $30 calls to buy (THF BF).

CREE (Cree Incorporated--$29.70; +0.24; optionable): Semiconductor equipment.
http://biz.yahoo.com/p/c/cree.html
STATUS: Made a nice breakout move in mid-December from a cup with handle, and after a test of that move it made another surge that hit up to 31.89. It has since come back again, but is acting well, holding its 10 day MVA (29.25), hitting below that level today but pulling back up to close as volume spiked back up to 2.26 million (average 1.65 million). Looks good if it can continue to hold support (18 day back at 28.17), and we are looking for a strong continuation of the run. The original target was 34, but we will see if it can make a move on the left side high of 36.65 (May high).
BUY POINT: Bounce: 31 on continued strong volume. Stop: 28.83 (7%).
POSITION: Stock and/or March $25 calls to buy (CQR CE).

PRE-ANNOUNCEMENTS: FDC could be looking at a bounce, and BRL is trying to hold support to set up its next move.

STU ($80.35; -0.25): Researching a date, as due for a split. STU broke over its April and August tops last week with a very solid move, and still looks good after pulling back last week. On the drop it has held its 10 day MVA (80.20) and prior highs, today dipping back a bit but still holding strong on below average volume (11,000; average 12,000). Still looking for a possible bounce, and on that move we will see how it handles the breakout high of 83.68, targeting 90. On a move over 81 on above average volume, stock.

AROW ($29.70; +0.51): Working on a date. Since August, AROW has tried the 30 level several times, dipping back to find support roughly at the 50 day MVA (currently 28.76), forming an ascending wedge. After a couple of solid moves up last week we were looking for a rest, and it dipped Monday, holding the 10 day MVA (29.11). Today it gapped up to 29.80 and then again tested lower (to 29.25), but rallied to close with a 'hanging man' doji. That pattern suggests that we could get another test lower, but it is holding well, having made a higher low. We want it to hold the 10 day or higher, we are anticipating a breakout move. The buy point is 30.12 on volume of 21,000, with stock.

GNSS ($67.19; +1.07): Working on a date. Great test and recovery today on strong volume. GNSS is holding firm over the 18 day MVA (64.55), testing below that level intraday but rallying to close on increased, solid volume of 3.25 million (average 2.49 million). Has formed a pennant now after its solid November-December move, and we are looking for a continuation of the upward momentum. The move over the high has a buy point of 71.03 on continued strong volume, with the aggressive play on a move over 69 on strong volume, with stock and/or March $65 calls to buy (QFE CM).

THQI ($46.86; -1.61): THQI failed at a test of the 50 day MVA (53) and then today crashed down through the 200 day (48.76). The selling has come on volume that has steadily increased each session, today moving back over the average at 1.94 million (average 1.51 million). Very weak, and although we could get a test back up toward the 200 day here, on its failure we can look at a put play, targeting 42.50 initially (August low and former down trendline), possibly with a drop to 40, in the range of September lows. After a failed move up toward 48, a drop back through 47 on increased volume, with February $60 puts to buy (QHI NL).

JCI ($80.70; -0.05): Forecast to announce a split on 1-18-02 in conjunction with earnings. At this time, the company cannot confirm this date. JCI is still in a tight consolidation at the level of its pre-September 11 range, holding the short-term MVA's (10 day at 80.59). With today's doji volume jumped back up over the average at 523,000 (average 404,000), and after this rest over support it could be ready to mount a move over the high. Our buy point is 82.82 on volume of 700,000, with stock and/or January $75 calls to buy (JCI AO - low open interest).

DIAN ($54.75; -6.05): Forecast to announce a split in 1-17-02 with earnings. At this time the company cannot confirm this date. CSFB came out Wednesday and downgraded DIAN, claiming that 2002 will be a tougher year for this type of diagnostic service company. That torpedoed the stock, and gapping down torpedoed positions. News can hit hard an unexpectedly, but DIAN did hold its 50 day MVA, bouncing back up intraday from 52.51 to close over its July-September tops. We could get more of a recovery that will give a better exit point.

PRE-SPLITS:

CHS ($40.00; +0.30): Splits 3:2 effective 1-19-02. Still looking good as it tests its breakout from a double bottom with handle, holding over its prior highs and using the 10 day MVA (39.52) as support. Today it tried a move up on higher volume (611,000; average 661,200), hitting our buy point (intraday high of 41.80) but pulled back to close with a 'shooting star' doji pattern. For new positions we are now looking for a move over the recent high at 42, with stock and/or February $35 calls to buy (CHS BG).

XRAY ($49.99; -0.21): Splits 3:2 effective February 1. XRAY reached as high at 52.03 Monday before pulling back to close, but it looks to still want to hold the 10 day MVA (49.39). Today it tapped down to that level, springing back up to close as volume was lighter than on Monday's action (336,000; average 233,500). After hitting the buy point and then pulling back, we are looking for a continued hold of the 10 day and a continuation of the strength we have seen as the stock has trended up. We could see a couple of more good bounces along the 10 day before we reach the split. For new or additional positions, looking for a move over 51 on increased volume, with stock and/or January $45 calls to buy (XAQ AI).

PAST SPLITS: FIC dipped but bounced intraday from the 50 day MVA.

CONTINUING CANDIDATES:

IGT ($68.65; +0.35): After a nice move last week we were looking for IGT to come back and test support. It fell back from its doji last wee, but caught support again at the short-term MVA's, holding the 10 day (68.12) after testing through its 18 day (66.77). A loose 'hammer' doji on decent volume (down to 1.65 million; average 1.19 million) which could indicate that IGT is ready to bounce again. Another one where we could see a couple of more bounces from the short-term averages before it tests lower support. For a bounce play, a move over 69.50 on increased volume, with stock and/or April $65 calls to buy (IGT DM).

TJX ($39.63; -0.23): Forecast to announce a split on 12-5-01 in conjunction with a board meeting. The company will not confirm this date, but based upon our research this is the date for the board meeting. Resting a bit after its fine move last week. Today TJX tested near its 10 day MVA (38.94), recovering to close as volume was fairly strong at 1.42 million (average 1.27 million). It could need a bit more time to settle out over the 10 day, but if it can continue to show strength and hold we are looking at a move over 40 on increased volume, with stock and/or April $35 calls to buy (TJX DG).

POST-SPLITS: CHBS is holding up but we are still looking for a possible test back.

Good Investing!
Jon L. Johnson and the Stock Split Report 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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