|
|
us stock market, trend trading stock
|
INVESTMENT HOUSE.COMTM |
|
Informing Investors Around The World |
| Read In All 50 States And Over 100 Countries
|
|
Weekend Newsletter for
January 7, 2007
Table Of Contents 1) MARKET SUMMARY 2) STOCK SPLIT PLAY 3) TECHNICAL PLAY 4) COVERED CALL PLAY |
|
| | Stock Split Notices Investing Q & As Glossary |
|
1) MARKET SUMMARY
> >From "The Daily" at InvestmentHouse.com
Techs can't keep the Thursday move going in face of Fed worries.
- Stronger wage growth, Fed concerns give sellers the session.
- Indices split the first week of 2007: January indicator.
- State of confusion: Wage increases worry investors re the Fed, but Fed worries re the bond inversion also worry investors
- Time for techs to pick up the torch as large cap industrials sag.
|
|
 |
Market Summary (continued)
Before the session the buyers faced a setback with stronger than expected jobs (167K) and rising average hourly wages (0.5% versus 0.3% expected). That sparked fears of wage-led inflation and thus more Fed action. MOT warned its Q4 was thinner than expected (yes earnings season is just about upon us). A Fed official opined the bond yield curve inversion is flashing "yellow" regarding a potentially slowing economy. Investors were worried from both ends: inflation due to higher wages (a common misconception) precipitating further Fed action versus a potentially slowing economy.
A big factor was the slew of downgrades. XOM, INTC, DELL, NOK, BRCM. Outside of the big energy name note the heavy tech bias. Techs made a surprise move on Thursday, surging past the NYSE industrials as they struggle after a strong, market leading move higher. That move caught many managers flat-footed right at the start of a new year. Many are looking at the results from last year when the market, after a tougher first half of 2006, took off in July and left many of them behind. Remember all of the performance chasing that kept pushing the large caps higher late in the year when they were extended? These managers were a large part of that. The Thursday turn to tech threatened to leave many behind again.
The answer? Proactive steps such as zeroing in on the some big tech names and downgrading them. It is an old play in the game book. It is not meant to derail any move, just to slow it down, knock it back some, and give the play callers the chance to get in on the move closer to the same level it started. If the move is for real stocks will rebound. How many times in the past do you recall an analyst going negative on a stock that made a sudden breakout, and then after it has peeled back turns positive again? Saw this same scenario with one analyst just last month and he was busted so to speak on CNBC. They call it a 'valuation call' because once it sells back some they can say it is a good value again and can start the buy.
Read "The Daily" Entire Weekend Summary
Here's a trade from "The Daily" and insights into our trading strategy:
Company Profile
STATUS: Double bottom w/handle. Friday LVLT started a strong volume breakout move from a 10 week base that formed along the 50 day EMA ($5.51). This is the smaller base of a base on base pattern that started with a 5.5 month double bottom with handle that broke out in October before falling into this current pattern. The solid pattern, strong money flow, and Friday move put it on our list; Cramer added it as one of his 2007 speculative plays Friday evening. That will likely send it higher, but no problem for us as we are looking for it to clear the December resistance for our buy point.
Volume: 57.161M Avg Volume: 33.196M
BUY POINT: $6.03 Volume=35M Target=$7.45 Stop=$5.61
POSITION: QHN FA - June $5c (75 delta) &/or Stock
Learn more about "The Daily" with Stock Picks! - Issued 5 Times Per Week
|
** SCOTTRADE **
| |
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).
 |
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: Ascending base. GRMN broke higher a week back though volume was less than stellar on the move. It bumped up against $57 but could not make a clean getaway without more trade. Last week it slid back, tapping at near support at the 18 day EMA ($54.13) intraday before rebounding to cut its losses. This pullback still keeps it right at the top of its 6 month base, and gives it a good launch pad for a breakout move. Want to see that trade level pick up as it tries the break higher once again.
Volume: 2.646M Avg Volume: 2.968M
BUY POINT: $56.55 Volume=4.5M Target=$66.45 Stop=$54.48
POSITION: GQR DK - Apr. $55c (63 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. |
|
|
3) TECHNICAL PLAY Company Profile
The Chinese internet stocks started to come back to life in December after sitting out much of the July to December rally in the rest of the market. During that time they formed up some nice bases, and late in the year we started to see some breakouts. CTRP was one we watched as it came back to near support in late November and early December following its breakout from a double bottom base. We love moving in after the test of a breakout because when a stock rebounds on volume after a test it shows that the big institutions are buying it again even at this higher price. That is a sign of strong support and commitment by the big money.
We put it on the report 12-9-06 when it started the bounce, and the next session we moved in as it was still moving up. We bought some stock at $58.50 and some March $60 strike call options at $4.90. CTRP enjoyed a good day, closing at $61.54. It paused for a couple of sessions after that strong move as a stock often does, then continued the move, gaining $3 over the next three sessions. Another 2 day pause to come back and test near support at the 10 day EMA, very common on solid breakouts and runs higher. Indeed, we liked it so much we bought some more positions on this test. It moved laterally for a week and then exploded higher as the market opened again on Wednesday, posting a $3.21 gain. Thursday it was up another $1.63. At this point our original positions showed gains of 14% on the stock and 83% on the options. We took some money off the table on each, but left part of the position and the later positions to work for us again after CTRP makes its next test.
It is always critical to keep an eye out in the market to the next group of stocks to take the lead. These stocks had been quiet on the large cap NYSE run higher, and when those stocks started to sputter some at the end of the year these stocks started to move and gave us some nice gains while many were still looking for the large caps to produce even though those stocks were extended on their runs.
Learn more about our Technical Traders Report - Issued 5 Times Per Week |
|
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!
MARKETPLACE
Investor's Business Daily: Complimentary subscription delivered to your doorstep!
Block All Pop-Ups! Complimentary tool from Amazon.com.
|
|
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.
|
|
|
| |
