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us stock market, trend trading stock
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INVESTMENT HOUSE.COMTM |
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Weekend Newsletter for
December 10, 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
Early selling cannot hold the day.
- Stocks cotton to the jobs report, hold the course with modest gains.
- Jobs report stronger than expected, but with massive prior revisions can you put much stock in it?
- Bond yield curve stretching back out as likelihood of Fed rate cut wanes.
- Earnings warnings shaping up to be the holiday wildcard.
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Market Summary (continued)
Steady as she goes, Mr. Sulu. Aye, aye captain. The jobs report was stronger than expected and the prior two months' revisions were heavily upside. That helped a weak futures market recover some lost ground, but stocks started weaker as the sellers took another shot at the market. After a bumpy first hour, however, the sellers lost heart and stocks, without the selling pressure, resumed course, i.e. rising with the prevailing holiday trend.
It was not all sugar plums and candy canes, however, as some chestnuts got roasted. NASDAQ and the large cap NYSE indices posted modest gains, but semiconductors had a hard time shaking off the XLNX and NSM warnings while the small caps lagged as energy sold after stronger oil prices turned to weaker oil prices (62.03, -0.46). Oil is still well off of its recent lows near $55/bbl, so this recent day-to-day quibbling over quarters is not really that telling. The more telling aspect is the significant improvement in energy stock patterns; those are telling a story of strength, and energy strength is derived through product price. With Saudi Arabia stating to US officials on Friday that OPEC is 'comfortable' supporting a $60/bbl oil price, the handwriting is on the wall. That was certainly self-evident the way OPEC reacted to oil's decline to $55/bbl. They were snorting and spitting, falling all over themselves in a rush to cut production and raise prices back over 60. After all, it takes a lot of money to finance terror and try to engineer the decline of the West.
But I digress slightly. Stocks answered NASDAQ's Thursday distribution admirably even in the face of those semiconductor warnings. Of course you can admire things that are not really that great or promising. You can admire the fight in a really bad sports team that tries to give the top-ranked team a good game but fails miserably. You can admire the athlete that finishes the race with no hope of winning. After the admiration, however, there is still a pitiful sports team and a mediocre racer with little hope of turning the tables anytime soon.
Read "The Daily" Entire Weekend Summary
Here's a trade from "The Daily" and insights into our trading strategy:
Company Profile
STATUS: Cup w/handle. Volume jumped above average Friday as BMET started the breakout move from its 8.5 month base. Low volume on the test the past 5 weeks that formed the handle, and now strong volume as it makes the breakout. Strong run from 1999 through 2004 needed a rest and this base has given it that, allowing this leader to set back up and run again.
Volume: 2.959M Avg Volume: 1.94M
BUY POINT: $40.12 Volume=2M Target=$47.95 Stop=$38.11
POSITION: BIQ DH - Apr. $40c (57 delta) &/or Stock
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).
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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: Breakout test. Still testing the strong late November break higher, falling to the 10 day EMA (23.83) Friday but on lower volume. Money flow continues to surge higher ahead of price, and after this test we are looking for DBRN to rebound and continue the breakout move. To recap: DBRN formed something of a reverse head and shoulders the past 7 months and it blasted higher in late November, surging on strong volume and breaking from the accumulation pattern. It is testing the gain the past week on lower volume, refusing to give up the gain. May take another session or two to finish the test and then head up again as it looks for a new high on this run. A solid market leader that has based well, made the breakout, and is on the first test. That is one of our favorite entry points.
Volume: 955.616K Avg Volume: 1.107M
BUY POINT: $25.05 Volume=1.4M Target=$29.95 Stop=$23.68
POSITION: DTQ CE - Mar. $25c (53 delta) &/or Stock
Learn more about our Stock Split Report and how we have made gains of 321% with our powerful stock split plays!
Details Here. |
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3) TECHNICAL PLAY Company Profile
We are always watching for new leaders to emerge, and in late October AMAG caught our eye as volume rallied and it broke higher out of a nicely formed 7 month base. After the initial surge we were looking for a test of that initial move as an opportunity to buy into the stock. The first test of the breakout is a great entry point because if a stock holds and starts higher on volume once more that shows the big money still wants it.
AMAG made the test into early November and we put it on the report on 11-4-06. All we had to do was then wait for the bounce on volume. That didn't take long in coming as on 11-7 AMAG surged off the 18 day EMA on strong, above average volume. We moved in with some stock positions at 40.95 and some February $40 call options at $6.70. AMAG hesitated, then jumped higher on 11-10. That was just a warm-up. On 11-17 AMAG exploded higher with a $13.10 gain. With such a strong move we decided to bank some gain, selling some stock for $55 (34% gain) and some of the options for $17.40, a 159% gain.
We were not done, however. We knew after such a strong run AMAG would test and set up again. It peaked near 60 and then pulled back to near support, the 10 day EMA, to end November. We put it on the report for a new buy to add to positions on 11-28. On 12-1 it started higher again on strong volume and we bought some more stock at $56.74 and some Feb. $55 call options at $6.40. More of the same story. AMAG paused a session and then surged $5 over the next two sessions. On 12-6 we banked some 12% stock gain and some 71% option gain on the new positions, letting part of those positions run along with the remaining original positions. Those original positions by the way are up about 50% on the stock and over 200% on the options. We are looking for this modest test to end last week to finish and then bank some of that strong gain as it makes its next run higher.
We love new leaders because they tend to explode higher on strong runs and then continue after tests. That gives us opportunities to average into winners and really ramp up our returns.
Learn more about our Technical Traders Report - Issued 5 Times Per Week |
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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!
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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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