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yahoo stock, us stock market
Begin Part 2 of 2
SUBSCRIBER QUESTIONS
Q: A question on stops and profits vs. losses: How do you deal with a stock that breaks out, then comes back to retest? My example is CBR. I bought it on the breakout (as per the Daily) at 9.20 on the breakout and it moved up to 10.95 three days later. The Daily target price was 11. Next day it dropped to about 10.25 with a low of about 10 and has been moving down to test the breakout point (today's range was 8.81 to 9.49, with a close on the high...looking like the test has been successful). [Editor: it since moved back up to 10.88 and closed today at 10.61] My question is, how did you play this stock? Did you buy at 9.20? Did you sell some or all at 10.5-10.75? Did you hold on and let it come back and test? Did you/will you add to your positions here at 9.5? Do you move your stops up as the stock moves up?
A: How I deal with tests usually depends upon the market. If it is choppy as it was before 9-11 and immediately thereafter, I am quick to take a 20% (or very close thereto if the stock appears to be topping) on any stock move. Now that breakouts are holding up better and are giving successful tests I will often let the stock test the move and then add positions when it does test and then start back up on what appears to be good volume. With CBR it was bought when it spiked up on good volume but could not hold to the close. It then shot up right to the target three sessions later on massive volume. It closed at the high so there was no reason to think it would reverse. Well, it gapped down the next session and fell, but volume was light. Looked as if it was going to test the move, but I decided to hang on. It rode all the way down to the buy point, bounced, and then tested lower intraday below the buy point and blasted up last week.
I could have sold that first big rally and thought about it as the stock ran 19% from the entry point. I did not, however, and when it started back on lower volume, I let it go for the test because I liked the big volume move. I quite often, however, will sell half my position on a 20% move such as that. I am not adverse to taking a 20% gain in a hurry on a stock position. I also could have raised my stop loss point to maintain some gain but chose not to. We are going to address that in another subscriber question this week: the pitfalls of stop losses.
When I decided to ride out the test, the important thing was to be patient: if the price/volume action was good, I would let it test the pivot. That means it will sometimes trade intraday below my buy point; as long as it closed above that level, however, I will let it work for me. That is exactly what CBR did. I did not but should have bought more positions the next session when it started higher on a small gain on very high volume: a successful test. It then blasted up Friday but could not take out the prior high at 10.88. Today it closed lower but in the top half of the range on lower volume. It looks good, but I may sell half my position if it tests 10.88 again and does not break through.
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: HAND, RHAT
Stocks/Indexes from the Saturday report:
WB: Slight pullback on low volume (doji).
HAND: Nice move up! Ready to try a breakout from the ascending wedge.
RHAT: Broke out from the saucer with handle!
CFLO: Lower volume and just a small gain.
CHKP: Popped up but off its high with a tight doji. Can drop back here; on that move can look a selling February $45 calls for a move down to the 200 day MVA at the 43.43 range (the stock closed at 46.77).
Continuing plays:
ASKJ: Still looks good in the test of the breakout.
BEAS: Upgraded by Goldman Sachs. Popped up to 20.81 on the high. It may give us another move up, then on a pullback we can look at selling some calls for a move back to the 18 day MVA (near 16.90).
ITWO: Pulling back on lower volume; potential support at 8.
KSS: Holding the ascending wedge-type pattern and some upbeat comments today on the stock.
KSWS: Volume spike in the handle! Be ready.
PENN: Testing the breakout and holding the 18 day MVA on low volume.
NABI: At the 50 day MVA, selling down on rising volume. Showing a loose doji, it will try to hold the support, but the higher volume doesn't look good.
NTAP: Sold off on heavy volume, and bounced slightly from the 18 day MVA, but does not look good; in danger of breaking the support. Rumor it will warn. Want the 18 day MVA to hold or out.
VRTS: Selling back to test the 200 day MVA and the 18 day MVA at the 45 range.
YHOO: Reported that online ad market has stabilized. Up on rising volume in its cup base! Has resistance at 20, so is a buy over that price.
SUBSCRIBER'S CHOICE:
ADLAC (Adelphia Communication--$32.66; +0.95; optionable): Media
http://biz.yahoo.com/p/a/adlac.html
STATUS: In a 3-year base (almost that long, with highs over $80) but now off the lows near 20. ADLAC has been in a pretty steady uptrend from the November lows, and Monday broke over the 200 day MVA (32.65) after a short one-day pullback on lower volume (it paused in December to move somewhat laterally in a consolidation before moving back up in the last week or so). The stock closed one cent above the 200 day on stronger volume (5.2 million; avg. 3.7 million), the company declaring today payment of quarterly dividends beginning the first of February. The pullback ahead of this break of major resistance was very short, but certainly the move above 200 day MVA is positive. We would look for ADLAC to hold this level now for a continued move up in this most recent base of 7 months (started mid-June). The stock shows good money flow, and buying is positive. Target: 43
BUY POINT: Over 33 on volume in the range of 6 million or better. Stop: 30.69 (7%)
POSITION: Stock and/or April $30 calls to buy (AIE DF).
http://www.investmenthouse.com/cd/adlac.html
Best Plays:
1) PVSW: Just about to break out.
2) DNCR: Ditto.
3) DAKT: And another.
4) TARO: A potential put play after breaking support.
New:
PVSW (Pervasive Software--$3.30; +0.40; no options): Application Software
http://biz.yahoo.com/p/p/pvsw.html
STATUS: Making a strong move up from its 18 day MVA (2.98) on strong volume (99,200; avg. 56,000). The stock is in a 14-month saucer with handle, and this move up in an incipient breakout move. Handle high is 3.33, and that puts our buy point at 3.46. This pattern is part of a larger base that is just over 2 years in length, and represents the bottom of that big base, but the strong move up from the 50 day MVA since mid-October has propelled the stock off its absolute bottom Looking good, with huge money flow, and relative strength breaking out. Initial target: 4.50
BUY POINT: 3.46 on continued strong volume (minimum breakout volume is 84,000). Stop: 3.22 (7%)
POSITION: Stock.
http://www.investmenthouse.com/cd/pvsw.html
DNCR (Dynacare--$18.15; +1.65; no options): Diversified Services: Business
http://biz.yahoo.com/p/d/dncr.html
STATUS: Newly issued just over a year ago. DNCR is breaking out from an ascending wedge-type pattern (viewed on a clothesline chart) on huge volume of 905,900 (avg. 154,000) that formed as a test of its breakout from an earlier ascending wedge that ran its course September through November. The stock blasted up from the 10 day MVA (16.70) and just beat the December high at 18.12, a bullish break of resistance, and we will look for a continued breakout from here. DNCR pulled off the intraday high of 18.90, but that is not uncommon on strong moves. Money flow and relative strength breaking sharply higher, and buying picking up nicely. Target: 22
BUY POINT: 18.20 on continued strong volume. A buy up to 19.16 on continued strong volume. Stop: 16.93 (7%)
POSITION: Stock.
http://www.investmenthouse.com/cd/dncr.html
Update:
DAKT (Daktronics--$8.85; +0.44; optionable): Scientific & Technical Instruments
http://biz.yahoo.com/p/d/dakt.html
STATUS: DAKT is in a 7-month base with highs near 33 but has moved up from the lows in the base that are at the 6 level. The stock is in an ascending wedge of 7 weeks and starting what looks like a breakout move as volume screamed up to 271,400 (avg. is 81,000). The stock grabbed the 50 day MVA on the opening price at 8.41 and bounced up after selling back to that level the previous session. Looking for the strong move over resistance at 9. Showing good money flow and improved buying. Target: 11-11.50
BUY POINT: 9.13 on continued strong volume. Stop: 8.50 (7%)
POSITION: Stock and/or February or April $7.50 (QKC BU or DU; low open interests)
http://www.investmenthouse.com/cd/dakt.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
A put play:
TARO (Taro--$35.45; -1.85; optionable): Drug Manufacturers
http://biz.yahoo.com/p/t/taro.html
STATUS: TARO has been bleeding away since late December, and finally Monday broke below support of its up trendline (that connects the September and December lows) and the 200 day MVA (35.71) on strong and rising volume of 971,300; avg. 656,000). On that action, we are looking for a continued fall, perhaps to a test of the September low near 28. November low is at 34, and other support could emerge at 32, but the stock isn't looking good on the break of these supports.
BUY POINT: 35 on continued strong volume.
POSITION: February $40 puts to buy (QTT NH).
http://www.investmenthouse.com/cd/taro.html
AJG: Finally making the plunge, falling below 32 today (our target is 30).
KRON: Popped out to a new closing high Monday as it upped its earnings estimates! Volume was strong. We will look at a test of 52 for new positions.
APPB: Pulled back to just under its 18 day MVA after Friday's nice move over that level, on strong volume. Such was the market today, however.
UP & COMERS PORTFOLIOS: BBBY, EPIQ, KKD, MMS, NDN, SRCL, CPRT, EBAY, THQI, KG.
SRCL (Stericycle--$58.01; +0.06; optionable): Materials & Construction
http://biz.yahoo.com/p/s/srcl.html
STATUS: Pulled back from the December high of 62.85 (hit twice) over the last 2 weeks. Volume is low for the last 2-3 days, and SRCL is holding the 50 day MVA (Monday's volume was 197,800; avg. 289,045). The stock tapped the support 2 of the last 4 sessions, and with the tight doji today looks ready to try for the move back up. SRCL made a nice uptrending move since early November, and was due for a more extensive pullback after bouncing up off the 18 day MVA 4 times. It may have completed that pullback here. Look for a move up and over the 18 day MVA (56.13); aggressive positions from here in a good rally. Target: 72
BUY POINT: Aggressive: 59.20 (hit 59.10 today and Friday) on strong volume in a rally. Stop: 55.06 (7%). Break of resistance (18 day MVA at 59.63): 60.25 on volume of 290,000 or higher. Stop: 56.03 (7%)
POSITION: Stock and/or February $55 calls to buy (URL BK).
http://www.investmenthouse.com/cd/srcl.html
KKD: Held with a doji (on lower but above average volume) at its up trendline, after a pullback of 5 days (mixed with some selling). Looking for a hold here, and if it moves up on even stronger volume, we will try to ride it to the old high or beyond. Nice recovery thus far.
BBBY: Forming an ascending wedge above the 50 day and 18 day MVAs.
NDN: Holding at the 50 day MVA where it likes to bounce. Looking to take new positions on a move over 38 for a ride back over 40.
EPIQ: Continued to stir. Volume dropped, however, on this second move off the 50 day MVA. Not strong buying, and the stock has some potential resistance from October congestion, but things are looking better here.
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
MSFT: Upgraded to a buy at ABN AMRO. In regular trading sold back mildly to test near 18 day MVA support. Our concern: it has again failed to take out 70.
BRCM: Taking those profits on the options positions as the stock headed lower. Volume was lower at it tapped near the 45 support on the low and recovered. Concern: same as MSFT; it again hit 50 and could not take it out (third time). This has become a key stock, particularly post 9-11. Selling some covereds on existing positions tomorrow if it continues to head lower, but will look for it to hold at 42 to 43. If not, the market could be in trouble.
PXLW: Watch it at the 50 day MVA; tapped on the low on rising volume.
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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yahoo stock
us stock market
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