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Support and Resistance

Nasdaq: Closed at 2044.89.
Resistance: The December intraday high remains unconquered (2065.69). The up trendline is at 2115. Then 2250 to 2300. There is not a lot of specific resistance. If the Nasdaq can get the trigger, it can run quite a ways.
Support: The 2040 level is a potential support area and once again it held on the close. The down trendline is now coincident with the 18 day MVA (1998.86). That bolsters support at 2000. After that 1934 to 1941 (tops of prior consolidation) have been the best support since the early December gap higher.

S&P 500: Closed at 1155.14.
Resistance: The 200 day MVA at 1166.79. The December high at 1173.62. Then the hump in the March double bottom at 1183.35.
Support: The 18 day MVA (1153.23) and 1150 are trying to hold, but 1150 is soft support. Then the 50 day MVA is at 1138.91, and is bolstered by some strong support at 1125.

Dow: Closed at 10,094.09.
Resistance: Again, 10,280 to 10,300 has acted as the tops recently for the index. The entire 10,200 to 10,500 is the trading range from June to August 2001 and represents resistance. The down trendline from January 2000, the all-time high, is moving right at 10,500. The up trendline is at 10,440.
Support: Looking at the 200 day MVA (10,096.90). Below that, 9992 has acted before as support, but it is weaker. The 50 day MVA is next at 9897.44.

Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.

1-8-02
Factory Orders, November (10:00): -3.3% actual versus -2.6% expected and 7.0% prior (revised from 7.1%).
Consumer Credit, November (3:00): $19.9B actual versus $4.7B expected and $11.2B prior (revised from $7.0B).

1-10-02
Export Prices ex-ag.; December (8:30): -0.4% versus -0.4% prior.
Import Prices ex-oil; December (8:30): -0.6% versus -0.6% prior.
Initial Claims; 1-5-02 (8:30): 420K expected versus 447K prior.
Wholesale Inventories; November (10:00): -0.3% versus -1.0% prior.

1-11-02
PPI; December (8:30): -0.2% versus -0.6% prior.
Core PPI; December (8:30): 0.1% versus 0.2% prior.

SUBSCRIBER QUESTIONS

Q: Regarding stop losses, I have heard that they are visible to market makers and that they can manipulate stock prices to result in your stop loss being triggered and then the stock runs right back up. Are stop losses really good protection?

A: We use stop losses carefully, and we discuss their various types and uses in our online seminars. One main theme we teach is that stop losses are not perfect by any means, and they can fail you when you need them the most, e.g., when a stock has bad news and plunges. Your story is another one of the pitfalls most learn about personally when they start investing. Back in 1995 I recall I found a good little stock in the $10 range. It was a relatively new issue and it had a lot going for it. It made a strong move up to 12.50, tested the move, and started back up. I bought in with the intention to let it run as it was a newer issue and was looking as if it had some legs. I was using a new broker, and when the stock ran from right at $10 to $17.50, I received a feverish call about how I should protect my gains, etc. At times I used pre-set stop losses on very large stocks with a high average trading volume for this very reason: there was less likely to be manipulation of the price. This stock traded about 100,000 shares average per day; it was getting a following. Well, the broker convinced me that since I was not going to be able to watch the stock I should put in a stop loss instead of just using a mental stop loss and keeping up with the stock a couple of times a day. Well, it was on the Nasdaq, and sure enough after the loss was put in place, even though the stock was showing a nice gain on some good volume that session, the price just ran right down to my stop point, I was taken out, and it just rallied right back up. A red-faced broker called with the news.

Stop losses are not perfect. This is one of the things that can happen on thinly traded stocks. There is no perfect safety net for stocks. I often use mental stop limits, pre-set levels I want to consider selling whether 7% from my buy point or under some support (moving average, trendline). When I do set stops, I usually use a stop limit where I am saying I want to sell at a specific price, not at any price once the stock moves past my stop order. Also, it helps to use them on very liquid stocks with large daily trading volume. Less chance of manipulation and less chance that your stop order will be bypassed on any downside move.

PLAYS TO LOOK AT: Nice breakout from SYMC! GNSS made a breakout and held up pretty well also.

BONUS PLAYS:

KEA (Keane--$18.98; +0.08; optionable): Software.
http://biz.yahoo.com/p/k/kea.html
STATUS: KEA has formed a cup deep in its base, puling into a long handle consolidation since making a great surge in through early December. It shook out sellers on a move through its short-term MVA's (10 & 18 day at 18.77 and 18.55), and last week made a surge back through those levels, where it again is consolidating. There were a couple of huge volume spikes Friday and Monday, Wednesday showing a doji on low volume (158,500; average 245,000). Looking for a breakout, with the handle high at 20.05. The aggressive play is on a move over the recent high. Good money flow. Target: 23.
BUY POINT: Aggressive: Over 19.18 on above average volume. Stop: 17.84 (7%). Breakout: 20.17 on volume of 375,000. Stop: 18.76 (7%).
POSITION: Stock and/or February $17.50 calls to buy (KEA BW - low open interest).

MOGN (Mgi Pharma--$15.36; -0.19; optionable): Drugs.
http://biz.yahoo.com/p/m/mogn.html
STATUS: In a cup with handle formed off a failed double bottom (the cup also has something of a double bottom configuration). The stock pulled laterally into a handle over the last few weeks. It has had some trouble trying to breakout, making intraday highs near the breakout but pulling back. It did so again today, dropping back from 15.85 to show a doji as volume was quite low (50,900; average 139,700). It needs some volume to push it over the top (handle high 15.90; left side high 16.50). Target: 19.
BUY POINT: 16.02 on volume of 210,000. Stop: 14.90.
POSITION: Stock and/or April $12.50 calls to buy (QOG DV - under 100 open interest).

MARKET FAVORITES:

PRGS (Progress Software--$19.20; +0.85; optionable):
http://biz.yahoo.com/p/p/prgs.html
STATUS: Trying to make its way up in the right side of its base. In early December PRGS broke over its May-August range, testing the move (and its 50 day MVA, at 14.43) over the last three weeks. After tapping the 50 day Monday, PRGS has made a solid move the last two sessions, today breaking back over its December high (19.20) with huge volume (542,700; average 139,700). With the late market weakness, PRGS dropped off of its intraday high of 19.76 to close. We will see if it can hold here through a bit more market weakness, and if it can show that strength we will watch for a strong move back up. Target: 23.
BUY POINT: After holding the range of 19 through some market weakness, a move back over 19.50 on continued strong volume. Stop: 18.18.
POSITION: Stock and/or March $17.50 calls to buy (RGQ CW - under 100 open interest).

KLIC (Kulicke & Soffa--$20.19; -0.05; optionable): Semiconductor equipment.
http://biz.yahoo.com/p/k/klic.html
STATUS: KLIC made a huge move last week, clearing its November-December highs after making a couple of solid bounces off of the 50 day MVA (17.18). It is holding up very well after the recent move, showing four consecutive dojis or loose dojis. It started up today, just clearing its recent consolidation highs when it hit 20.92, but it pulled back with the market to close. Volume was in at 1.18 million (average 1.28 million). Looking for KLIC to continue to hold if we get some Nasdaq weakness (10 day MVA at 19.16), and we can look for a strong move back over today's high. Target: 25.
BUY POINT: 21.04 on volume of 1.5 million. Stop: 19.57.
POSITION: Stock and/or April $17.50 calls to buy (KQS DW).

NEW PRE-SPLIT PLAY:

HOTT (Hot Topic--$32.95; -0.55; optionable): Apparel. Splits 3:2 effective February 6.
http://biz.yahoo.com/p/h/hott.html
STATUS: Announced a split today, and showed that power splits can generate, trading up $1.50 after hours. HOTT is in a double bottom that is within the larger cup dating back to May (high 38.20), and has made a couple of nice surges off of its 18 day MVA (32.07) on this run up. After surging up to an intraday high of 34.69 Monday, HOTT has drifted back the last two sessions on lower volume (322,400; average 863,200). It is holding the 10 day MVA (32.75), and we expect a gap up tomorrow, but we are looking for a breakout over the recent high (left-side high of double bottom is at 34.93). Target: 40 (watching resistance at the all-time high).
BUY POINT: Breakout: 34.81 on volume of 1.3 million. Stop: 32.37.
POSITION: Stock and/or February $30 calls to buy (UHO BF).

PRE-ANNOUNCEMENTS: EXPD, PII and SONC are worth a look.

GNSS ($72.51; +2.96): NEW INFORMATION Forecast to announce a split with earnings, on January 17 after the close. Held up nicely today! GNSS gapped up to open over the pattern highs (pennant dating back to mid-December), and sailed through our buy point on its way to the intraday high of 74.90, moving on sharply increased volume of 4.18 million (average 2.48 million). Although it pulled back to close with the market, it still held on to substantial gains - which we like to see. With the candlestick we may see more of a pullback, and with current positions, are looking for the former pattern highs (70) to provide support. For additional positions the aggressive can play a move over 73.25 (still a buy up to 74.58 on this move) on continued strong volume, with stock and/or March $65 calls to buy (QFE CM).

DHR (Danaher--$62.19; +0.19): Forecast to announce a split in late January in conjunction with earnings; however, it has declared a quarterly dividend that could make a split announcement less likely. DHR made a solid move Friday, and has since gently pulled back to the 62 level (10 day at 61.38, at the down trendline) as volume has fallen. It closed with a tight doji at that level today with slightly decreased volume of 662,900 (average 1.24 million). Not bad considering the conditions, so we are looking for it to continue to hold here and mount another solid move back up in a stronger market. The buy point remains 64.22 on volume of 1.7 million and the aggressive can still look at a move over 63 on volume of 1.5 million. Stock and/or March $60 calls to buy (DHR CL).

DRI ($37.30; +0.11): We are working on a date. Still testing Friday's breakout (from a handle-type consolidation), and holding very nicely over the 10 day MVA (36.56) and up trendline (established last month) on falling volume. DRI closed with a low volume doji over that level today on decreased volume of 520,700 (average 684,500). A good-looking test. We want to see support continue to hold while we wait for a bounce back up and a continuation of the move. The buy point over the recent high remains 38.51 on increased, above average volume while the aggressive can still watch for a move up from here on volume in the 1 million range. Stock and/or April $35 calls to buy (DRI DG).

RYL ($72.93; +2.53): Forecast to announce a split on 1-24-02 in conjunction with earnings. Nice move today! After holding support at the 18 day MVA (70.61) for the past few sessions, RYL gapped up to open just over the 10 day (71.73) and made a solid push up to an intraday high of 73.50 as volume increased to 430,800 (average 344,500). Pulled back a bit to with the market to close, but still held most of the gains. A good bounce and we are looking for more. On a move over 73.50 on continued strong volume we can look at additional positions with stock and/or February $70 calls to buy (RYL DN).

PRE-SPLITS:

SYMC ($73.25; +3.26): Splits 2:1 effective February 1. Great breakout today! After running up against resistance at 70 in the 5-week handle, SYMC finally gave us the move we have been looking for today. Volume shot up to 4 million (average 2.51 million) as the stock took off and sailed through our buy point on its way to the intraday high of 74.13. Slight pullback with the market at the close, but still a terrific pre-split move and we are looking for more. Still a buy up to 74.55, with stock and/or February $65 calls to buy (SYQ BM - low open interest).

XRAY ($50.30; +0.13): Splits 3:2 effective February 1. Tried to move today, shooting up to an intraday high of 51.54, but could not sustain the move and fell back with the market to close, showing something of a shooting star doji over support. XRAY is in a short handle over the 10 day MVA (49.90) on steady volume of 250,500 (average 241,400), but with this sixth consecutive doji we will see if it can make another move it can sustain. The play remains a move over 51 on continued strong volume, with stock and/or January $45 calls to buy (XAQ AI).

LIZ ($52.74; -0.25): Splits 2:1 effective 1-17-02. Still holding steady with 3 consecutive dojis at the pattern high. Volume is falling (down to 386,300, average 510,900), so we are watching out for a test back toward 52, and after we see LIZ hold support there we can catch a run back up. However, for now we will see if it can hold up and make another move, watching the stock's high of 54.95. The play remains a move over 53.35, with stock and/or April $50 calls to buy (LIZ DJ). AEOS warned after hours, so may come under early pressure.

CONTINUING CANDIDATES: ACS moved up yet again - we are enjoying the ride, but are wary that this move could be a climax run and quickly tank.

AZO ($64.20; -1.09): Gave up 65 today, moving on increased volume of 1.37 million (average 1.4 million). Didn't quite show the volume we were looking to trigger our put play (we wanted above average), but with this breach of support (from the November consolidation) it is looking ripe for stronger selling. For positions entered today we will continue to target 60, and on a stronger move through 64 we can look for new or additional positions with February $70 puts to buy (AZO NN).

THC ($62.10; +0.17): We are researching a date. Volume picked up today (1.76 million, average 1.88 million) as TCH spiked up to an intraday high of 62.85 before pulling back to close with a tight doji over the recent support of the 62 level. Still watching to see if it can hold here and continue in a lateral, handle type consolidation that sets up the next run. The breakout point remains 63.12 on increased, above average volume. If we get a hold of support at 61 on a nice pullback, we can look at positions on a move back up. Stock and/or February $60 calls to buy (THC BL).

POST-SPLITS:

CACI ($41.12; -0.33): Split 2:1 effective 12-7-01. The pullback may be over. CACI tried to move on the recent highs, but the volume, although slightly increased at 402,300 (average 418,100), was still quite low and the stock pulled back with the market to close with a loose 'shooting star' doji over support at the 10 day MVA (40.74). This candlestick typically presages a move up and that is what we are looking for here. The breakout play remains 43.44 on minimum volume of 600,000, with stock and/or March $40 calls to buy (KFQ CH).

Good Investing!
Jon L. Johnson and the Stock Split Report 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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