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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.

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: Breakout from IBI! Remains a buy on the breakout up to 16.17. MCTR and NTAP moved up in their handles.

Stocks/Indexes from the Saturday report:
RESP: Still trying to make its move up from the short term moving averages in the cup with handle.
TBCC: Pulling back from Monday's extension of Friday's breakout from the ascending wedge.
ASKJ: Lower volume but sold back to the 10 day MVA after trying to move over Monday's high at 3.81.
JBL: Moved up as expected, and approaching resistance at the 18 day MVA (24.49); may turn down here at 24 level resistance for the put.
MYL: Fell out of the lateral pattern, on selling (high volume Wednesday). Can test the 50 day MVA at 35.37, but the pattern is dead.
BRCM: Moved up on a bounce from the 50 day MVA on strong volume and looking good. Will let it run as far as it will.

Continuing plays:
ARDI: Nice breakout from the cup with handle Monday, but pulling back on lower volume in an early test.
CBR: Consolidating along the 18 day MVA in a test of the breakout.
CLS: Will try to break the 18 day MVA on today's strong shot of volume.
EXTR: Will it beat the 50 day MVA? Up on rising volume (a put play from 12-15).
KEA: Still holding the 18 day MVA in the handle and still looks good.
KSS: Did not follow through on Friday's move up in the handle, but continues to hold above the 18 day MVA.
SEBL: Moved up from a tap at the 18 day MVA, on rising volume. 200 day MVA is at 31.10.
RBK: Trying to head higher, with volume increasing in the lateral pattern.
SGI: After moving below the 18 day MVA Friday, the stock was back over that resistance on strong volume Wednesday (12-26 report).
VNWK: Topping out on the breakout, showing a doji on lower volume. May not pull back a lot (to the 4.40 range, perhaps) before heading back up after a test.

Best Plays:
1) NMHC: A strong breakout move.
2) EUNI: Moving up in the test of its breakout.
3) IPIC: Ready to break to a new high.
4) BUD: Strong volume and a move up after testing the breakout.

New: Still considering the small stocks!

NMHC trades on less than 100,000 average daily volume.

NMHC (National Med Hlth--$11.40; +1.65; no options): Health Services
http://biz.yahoo.com/p/n/nmhc.html
STATUS: Broke out of a lengthy cup with handle base in early November, volume huge on the breakout run. The stock moved down to the 50 day MVA as it tested the breakout, held the 18 day MVA as it tightened up in an ascending wedge and from there Wednesday made another strong breakout move, easily sailing over the November high (10.40). A solid move with volume soaring to 158,500 (avg. 32,272), and looks ready to add more; an aggressive play from here (limit is 11.06), but today's move is strong. We really like the combination of these 2 patterns, cup with handle followed by ascending wedge. Huge money flow and buying up sharply. Target: 13.
BUY POINT: Aggressive: 11.50 on continued strong volume. Stop: 10.70 (7%)
POSITION: Stock.

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

EUNI (Euniverse Inc--$6.14; +0.65; no options): Internet Information Providers
http://biz.yahoo.com/p/e/euni.html
STATUS: Made a nice move up in a test of the recent strong breakout. EUNI broke out of a shallow cup base just before mid-December, and raced to a high at 7.00. Pulling back over the last several days with volume shrinking back well below average, the stock found support at the 5.50 range and shot up (volume up to 103,700; avg. 163,818); the 18 day MVA is at 5.34. We look for a move up to the 9 range, at the start of EUNI's larger, 20-month base, for which the current pullback is a likely handle. Showing huge money flow and buying.
BUY POINT: Aggressive: Over 6.20 on continued rising volume. Stop: 5.77 (7%). Breakout: 7.13 on volume of 246,000 or better. Stop: 6.63 (7%)
POSITION: Stock.

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

Update:

IPIC (Interneuron Pharma--$11.94; +0.85; no options): Drug Manufacturer
http://biz.yahoo.com/p/i/ipic.html
STATUS: IPIC was covered back in mid-December just before its strong breakout. The stock is now testing that move, pulling back to the 10 day MVA, support tapped twice in the last 4 sessions (currently at 10.82, the Wednesday intraday low). Today the IPIC got a nice surge in volume (955,500; avg. 412,000), which helped push price up from the drop to the 10 day. Now IPIC is closing on some potential resistance near the previous highs (from December at 12.32). Looking for a move over that based on the strong volume pop. Showing excellent money flow and buying. Target: 16
BUY POINT: Aggressive: 12.15 on continued strong volume. Stop: 11.30 (7%)
POSITION: Stock.

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

A favorite previous leader:

VRTS (Veritas--$45.81; +0.98; optionable): Application Software
http://biz.yahoo.com/p/v/vrts.html
STATUS: VRTS has been in an uptrend since late September (lows at 17.30), making its way up like the tortoise (in the hare story), until finally breaking back over the 200 day MVA (currently at 45.87) last Thursday but slipped back this week. The stock broke over its 50 day MVA back in October and since has bounced twice from its up trendline (connecting September and December lows. After tapping that support Monday, VRTS is back at the 200 day MVA with volume rising to 10.1 million (avg. 14.4 million). We are looking for another bounce from the up trendline for a move over the December high at 47.14. VRTS shows money flow and relative strength continuing to trend higher. Target: 54
BUY POINT: Aggressive: 46.50 on volume in the range of 14.5 million. Stop: 43.25 (7%)
POSITION: Stock and/or February $40 calls to buy (VIV BH).

http://www.investmenthouse.com/cd/vrts.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

AJG: Made the buy point for the put play (33.95) on rising volume today. Looking for a target at 31-30.
NVDA: may be ready again after a doji on above average volume just over the 18 day MVA. Third bounce up off of this level.
KRON: Tested down deep intraday on rising, above average volume. Closed with a doji, and this is very similar action to that back in mid-November when it bounded higher. Looking for that bounce.
ACS: Pulling back this week from the run up the channel, giving rise to the covered call play at least down to the 101 level.
APPB: Fell hard to the 50 day MVA (simple) on rising average volume. need to see it recover here on a good surge or at least sell some covereds if it does not.
MYL: Fell out of the consolidation on strong volume. Needs to hold at the 50 day MVA (35.50).

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

KKD: Testing the 18 day MVA on rising, above average volume. If it crosses here we will look at selling some calls on our older positions for a ride to the 50 day MVA(39.50). New ones we may cash out if it does not hold (43.30, tapped on the low today).
NDN: Diving with the retailers toward the 50 day (36.50) on higher volume. Needs to hold there.
EBAY: received a downgrade but managed to hold up fairly well today, continuing above its 50 day MVA on stronger though still below average volume. Still in good shape as the holiday season was great.

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

BUD (Anheuser-Busch--$45.60; +0.38; optionable):
http://biz.yahoo.com/p/b/bud.html
STATUS: BUD broke out of a double bottom with handle near the end of last month, and is now testing the move, forming a new handle to its 14-month cup base. The stock made the pullback in an orderly manner, with price and volume falling nicely. Wednesday, however, volume shot back over average levels to 2.35 million (avg. 2.1 million) and BUD, after tapping the 18 day MVA on the low of 44.65, shot back up over the 10 day MVA and its opening price of 45.20. Looking for a continued move up here, with BUD showing strong money flow and buying, for a move up and over the breakout high at 46.72. Target: 53
BUY POINT: Aggressive: 45.80 on continued rising volume. Stop: 42.59 (7%). Breakout: 46.85 on volume of 3 million or better. Stop: 43.57 (7%)
POSITION: Stock and/or March $40 calls to buy (BUD CH).

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

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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