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Begin Part 2 of 2
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: PVSW, KRON, BRCM,
Stocks/Indexes from the Monday report:
ADLAC: A slight move down, and back below the 200 day MVA.
PVSW: Nice breakout! Big volume on the move.
DNCR: Reversed the move; volume lower but still strong; can drop back to test 17.30 range. Don't like the quick, high volume reversal. Caution.
DAKT: Tried to add to Monday's move but failed. Volume was lower, however. We will see if it can hold the breakout.
TARO: Dropped to 30.80 on the intraday low, bouncing back with volume very strong. Still below the 200 day MVA. Right now we see if it can rally back over it or fails again for a further drop. Massive selling volume on the way down, and then massive buying on the way up.
SRCL: Moved up on stronger (average) volume, making the move we wanted off the 50 day MVA. We are ready to add more positions on a further move.
Continuing plays:
ASKJ: Very nice low volume handle. Preparing for the move.
CLS: A pattern similar to some chip stocks: a little cup with handle within a larger cup with handle. Strong volume and a move up from support.
DFXI: Breaking through resistance on big volume! A pretty ragged handle to the 4-month cup; not the best handle you can find, but a solid move. Buy point over 33.24.
ITWO: Nicely consolidating above support at 8, with volume dropping. Buy point over 9.15 on strong volume. Looks to be getting ready.
NABI: Bounced off the 50 day MVA on lower volume. This is one of our favorite buy points: 4 bounces up the 18 day MVA after a breakout, and then a test of the 50 day MVA before the next run.
NTAP: Held the 18 day MVA after Monday's heavy selling, and bounced slightly on low volume. If the techs start to run, it looks ready.
SGI: Ready to pull back after the strong breakout. Very solid move and gave us the gain.
SIB: Moving up on good volume and took out resistance in the upper right side of its cup. Not a great handle, but a nice move.
TBCC: Testing the breakout from its ascending wedge; tapped the 18 day MVA on the low, bouncing back up slightly.
SUBSCRIBER'S CHOICE:
ORCH (Orchid Biosciences--$5.19; -0.05; optionable): Biotechnology
http://biz.yahoo.com/p/o/orch.html
STATUS: A small biotech stock that has formed a cup with handle at the bottom of a large 18-month base (highs near 61). The stock is off the lows (just under $2.00) and has made it back over the 200 day MVA, which is currently at 4.58. Higher support is at 5.04, the 18 day MVA, tapped on today's intraday low. ORCH showed a doji near the bottom of a handle pullback; the stock is in a 6-month cup with handle, much of it below the 200 day MVA. That doesn't help any pattern a lot, but we like the strong breakout over the 200 day that completed the right side of the base, and the pullback in the handle as volume has decreased slowly and steadily. ORCH has outstanding money flow and buying, and we expect the stock to head back up to break out of the current base. Volume Tuesday was low at 236,100 (avg. 560,000). Target: 8 (initial)
BUY POINT: Breakout: 6.48 on volume in the range of 840,000. Stop: 6.03 (7%)
POSITION: Stock and/or February or April $5 calls to buy (UOH BA or DA).
http://www.investmenthouse.com/cd/orch.html
Best Plays: We like them all!
1) SOX: Forming up in an interesting pattern.
2) SATH: Looks ready to move into a breakout.
3) OLGC: Strong breakout move! Still a buy, too.
4) VRTS: Ready to add to the solid move today, if it breaks resistance.
5) KKD: Heading up again.
6) AMAT: Held support and looks ready to move.
Index:
SOX (Phili Semi--$583.82; +3.58; optionable):
STATUS: The SOX is testing its recent strong move back over the 200 day MVA (that support is at 555), actually forming a short, 5-week cup with handle after a larger cup base that it tried to break out of but fell back. That can be a bullish combination of patterns. Showing a doji Tuesday (above an intraday low at 574.22 which the index has tested the previous 2 sessions) and the small move up, the index looks like it is getting ready for what we think will be a strong upside breakout. Target will be in the 650 range.
BUY POINT: Aggressive: 590.50 (over the December high at 590.34) in a rally. Breakout: Over 600.18 (Friday's high) in a rally.
POSITION: Aggressive: January $590 calls to buy (SJX AR). Breakout: January or February $600 calls to buy (SJX AT or BT).
New:
SATH (Shop At Home--$2.98; +0.16; no options): Retail (catalog)
http://biz.yahoo.com/p/s/sath.html
STATUS: Making a nice move up from the base of its longish handle (in proportion to its cup); SATH is in an 18-week cup with handle. Volume was big Tuesday (325,900; avg. 106,000); the company announced the hiring of a new executive vice-president. We are looking for a breakout over the November (handle) high at 3.15. The chart shows strong money flow and good buying for the stock. Target: initial, 4
BUY POINT: Aggressive: From here. Breakout: 3.20 on continued strong volume. Stop: 3.05 (7%)
POSITION: Stock.
http://www.investmenthouse.com/cd/sath.html
Update:
OLGC (Orthologic--$5.50; +0.55; no options): Health Services
http://biz.yahoo.com/p/o/olgc.html
STATUS: Broke out of the 18-month cup with handle! Covered the stock 12-21 for a bounce from the 18 day MVA, but it continued down for a test of the 50 day MVA and made the bounce back from there, in the meantime forming a handle to the big cup. Tuesdays' volume was outstanding at 1.09 million (avg. 105,000) and the stock exploded off support at the 4.75 range. Looking for a continued move on the breakout, and OLGC is still a buy on this move, within 5% of our limit for buying on breakouts. Money flow, relative strength and buying all look great. Target: 7.50
BUY POINT: 5.55 on continued strong volume. Stop: 5.16 (7%). A buy up to 5.75 on breakout.
POSITION: Stock.
http://www.investmenthouse.com/cd/olgc.html
VRTS (Veritas--$48.73; +2.03; optionable): Application Software
http://biz.yahoo.com/p/v/vrts.html
STATUS: Nice, solid move off its 200 day MVA (45.75) as volume shot up and above average to 1.67 million (avg. 13.5 million). After its steady uptrend dating from early October, VRTS finally made it over the 200 day and now is testing the move. The support appears ready to hold the stock for another move up, but VRTS will have to get over resistance just under 50 that it has tapped at over the last 2-3 days. However, the stock looks ready to take out the resistance after today's action. Money flow and relative strength continue to plow upward steadily. Target: 60
BUY POINT: 49.85 on continued rising volume. Stop: 46.36 (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
FRX: A solid move up today after a pullback from the nice December run up to 83.19, the right side to a pretty ragged cup.
ACS: Up on rising volume, but pulled off of resistance from the December highs. It is still riding above its upper channel, so we need to be careful if it jumps up on big volume and then reverses. We will watch and let it run for now.
MIK: Has made its 4 runs up the 18 day MVA and is now selling off and headed for the 50 day MVA just under 30. This is what we were talking about with the covered call sale. Now it should hold at the 50 day MVA, and give us a good entry point for new positions and that is where we buy back the calls.
NVDA: Holding the 18 day MVA on low volume; in a chip rally look out for this mover, though this will be its 4th bounce from this support after breaking resistance in November. That does not mean it won't make the bounce, but it will need a bigger rest afterward if it does (pullback to lower support). For us that means a short term play; play it up and when it appears to falter, get out and then take new positions after it reaches the 50 day MVA. We can also sell calls at the apex of the next bounce and then ride it down and add more positions at the 50 day MVA.
AJG: Continuing down toward the target at 30 on the put play. What a put!
KRON: New all-time closing high. Unreal.
UP & COMERS PORTFOLIOS: BBBY, EPIQ, KKD, MMS, NDN, SRCL, CPRT, EBAY, THQI, KG.
KKD (Krispy Kreme Doughnuts--$43.90; +2.44; optionable): Leisure
http://biz.yahoo.com/p/k/kkd.html
STATUS: KKD has been selling back in fits and starts to the 50 day MVA over the last week, and Monday finally tapped the nearest to that support as it was going to get on the move down, hitting 40.40 on the intraday low ( the 50 day is at 36.65). We wrote the stock for a 50 day bounce late November, and it is doing it again, although the real support can from the up trendline connecting September and November lows. KKD was up nicely on strong volume today (1.13 million; avg. 847,000) and looks ready to take on the December high at 46.90. Strong money flow, relative strength breaking higher. Target: 54
BUY POINT: Aggressive: 43.95 on continued rising volume. Stop: 40.87 (7%)
POSITION: Stock and/or February $40 or May $35 or $40 calls to buy (KKD BH or KKD EG or EH).
http://www.investmenthouse.com/cd/kkd.html
EBAY: Was up slightly after hours on news the company may make some acquisitions.
CPRT: Dropped below the 50 day MVA on strong volume; has been selling earnestly for a few days with the sector. Time to exit if it cannot make a move up over the 50 day MVA tomorrow.
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
AMAT (Applied Materials--$45.78; +1.04; optionable): Semiconductor
http://biz.yahoo.com/p/a/amat.html
STATUS: Here is that pattern we were talking about in the summary. The semiconductors are looking interesting, as is the SOX covered earlier in the report. AMAT was in a cup with handle base of 20 weeks, and last week's strong move back over the 200 day MVA looked like it would be the breakout, but instead AMAT has moved somewhat laterally (handle), testing support at the range of Tuesday's intraday low, 44.50. It is doing that same thing as the SOX and other chip stocks in forming the small cup with handle within a larger cup pattern. We think that is a bullish combination, and are looking for a move up. AMAT posted over a point gain today with volume rising to 13.1 million (avg. 16 million). Looking for a breakout over the December high (46.58). Money flow and relative strength look good. Target: 56
BUY POINT: 46.71 on volume of 24 million). Stop: 43.44 (7%)
POSITION: Stock and/or February $42.50 calls to buy (ANQ BV).
http://www.investmenthouse.com/cd/amat.html
CHKP: Testing the breakout over its 200 day MVA, showing a tight doji on lower volume. Can test 45.08 (buy point in cup with handle); closed at 45.80.
BRCM: Another one of those patterns discussed in the summary. Held support above the 10 day MVA (prices from November and December at the 47 range) and moved up on a good shot of volume. Looks ready to move over the highs from those 2 months. Buy point is 50.20 on continued rising volume.
JNJ: Moved lower below the 50 day MVA, bouncing back from a tap at 57. Volume was still below average, but we have to keep an eye on it for a recovery here or we will exit. The lower attempt at a high in late December on low volume was not a good sign for a further move up.
HGSI: Heading lower as it broke below support from a double top pattern. Volume was higher; can drop to the September low at 26.41. It is in the dumpster.
BUD: Forming a pennant pattern with a high at 46.72 (December high). Volume was up sharply with the stock hold the 10 day MVA (doji). Looks good in the test of the breakout!
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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