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INVESTMENT HOUSE.COMTM |
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Weekend Newsletter for
January 14, 2007
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
Stocks fight off early selling, refuse to give up gains ahead of long weekend.
- After a weak start stocks close higher once more, showing no fear ahead of the 3-day weekend and earnings.
- December retails better than expected, but not better than expected.
- Huge week for economic data, huge week for earnings.
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Market Summary (continued)
After several upside sessions and a NASDAQ breakout stock futures were lower Friday. It wasn't just a reflex action by the sellers after a strong move. AMD warned as to its quarter, and that threatened the tech sector, especially chips and the SOX which was the only index to close lower Thursday. Retail sales were stronger than expected for December, and while that is a positive for the economy, investors live pretty much in a cold war state with the Fed that sometimes flares into a hot war. Right now this pause has turned it back more to a cold war, but the Fed's finger is still poised over the rate hike button, and the stronger retail sales were viewed as trying the Fed's patience. Strange isn't it? We all hope for a stronger retail season and when it comes in better than expected we then worry it might goad the Fed into another rate hike. Man, being an investor is sometimes akin to walking on eggshells around cranky, demanding in-laws.
Oil was rebounding as well, though it was quite modest (52.99, +1.11) compared to the tail kicking for the week. Bond yields were up sharply after retail sales (4.84% 2 year, 4.71% 10 year), and they rose further as the shortened bond session wore on (closed at 4.88% versus 4.77%). Notice how bond yields are on a surge as the bond market wipes out any chance of a rate cut? Bond yields are rising to meet the Fed, not vice versa. Thus while many fear the Fed, rates are doing the Fed's work for it. Bernanke has to be pleased, not anxious.
That set a negative stage and stocks were indeed lower midmorning, but oil did not surge higher and AMD, well, Intel is selling a lot of old chips on the cheap, and that has to be slicing into AMD's margins. The market seemed to figure that out and stocks overall rallied with even SOX turning just positive at the close.
Read "The Daily" Entire Weekend Summary
Here's a trade from "The Daily" and insights into our trading strategy:
Company Profile
STATUS: Test breakout. NTGR gapped out of a 13 month double bottom base in late October, then consolidated the move with a 9 week reverse head and shoulders pattern. Shot higher from that pattern to start the year, peaking out at 30 early last week and starting to slide back. Friday it tapped toward the 10 day EMA (28.69) on the low and then rebounded to recoup some of the losses. Likely to continue back to further snug up to the 10 day EMA and then resume the breakout run. When it makes the rebound we move in. Strong money flow leading the way higher. Another leading stock with top fundamentals growth rates to go along with the excellent technical pattern.
Volume: 770.433K Avg Volume: 703.562K
BUY POINT: $29.32 Volume=900K Target=$35.32 Stop=$27.95
POSITION: TUD FF - June $30c (50 delta) or TUD FE - June $25c (72 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: Cup. Breaking higher off the 50 day EMA (29.74), working on the
right side of a short 12 week base that is consolidating the late October
breakout from an 8 month cup with handle base, running EAT to a new
all-time high. It peaked at 31 and then faded back into the current
pattern. Strong money flow and positive accumulation in the current small
base has set up the next break higher. Solid move Friday on a second shot
of above average volume. Ready to move in as it continues on this move
and then gain as it tests a break through the high at 32.
Volume: 1.64M Avg Volume: 1.591M
BUY POINT: $31.52 Volume=2M Target=$36.75 Stop=$30.11
POSITION: EAT GF - July $30c (62 delta, low OI) &/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
The large financials are one of the strongest market sectors, and we always like to look for plays during ongoing runs so we can profit from the short term upside bursts as well as the longer term trend. BSC is one of those. It broke out from a 22 week base in October, and we have some stock positions on that move, but we really like to make a lot of money playing options on the shorter runs within the overall move. A stock will make 4 to 5 such short runs up the 10 and 18 day EMA after a breakout, and we look for tests of those support levels to move in and play the upside runs.
We saw it show a pair of dojis on the candlestick chart right at the 18 day EMA on January 4 and 5. We put it on the report that weekend, and on Monday sure enough it bounced and we bought in with some April $165 call options at $8.20. When a stock is this high in price options are a great way to take advantage of its strength and really ramp up your returns. A strong stock still early in its breakout run is a great candidate for playing these upside bounces within the overall uptrend. You have so much going for you in these patterns you have stacked the deck in your favor and it can be rather easy profiting from them.
BSC paused the next session (often the case after a big run the day before), but surged another $3.43 on 1-10. It added a couple of points on Thursday, then Friday just under a point. That was five consecutive up sessions and we were facing a long weekend. Our options were selling for $13.40 so we decided, given that BSC typically runs 5 to 8 days on these runs, to take some gain. We sold part of our option position for a 63% gain for 5 days in the play. Now we have money in the bank and the pressure is off to let BSC continue to work higher for us. If we get another 2 to 3 upside days we will take the rest of the gain and then wait for the next pullback and if it sets up right again, do it all over.
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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