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Weekend Newsletter for
January 21, 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
Market finds relief in energy stocks.
- Friday relief bounce provides little relief but some positives.
- First round of earnings shows some slowing, and market feeling it near term.
- NASDAQ trying to hold the line and reload for more relief from the selling.
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Market Summary (continued)
After NASDAQ abdicated the early 2007 leadership with a nasty two-day sell off that reversed its breakout and dumped it back into its 9 week range the market found a little relief Friday. There was not a lot of news to really push any action. Earnings were mediocre with GE in line and C posting a bit better results. The Fed's Lacker was adding his commentary following Bernanke's Thursday testimony to the Senate, bloviating more about inflation remaining the 'predominant' risk though housing was an economic risk. Michigan sentiment jumped sharply to 98.0 versus 92.4 expected and 91.7 prior, but it was the preliminary report, and those dorm rooms surveyed have been known to alter the views dramatically by the final report in a couple of weeks. Of course, a plunge in oil prices (though up Friday at 51.99, +1.51) and thus gasoline (already well below $2/gallon in Houston area even with ozone reformulation costs) tends to work wonders on the American consumer's psyche.
With the so-so news headlines and a hangover from the Thursday thumping on NASDAQ, stocks started lower. No harsh sell off, however, and after an hour of sparring the indices advanced nicely, recovering the early losses and moving positive. Selling returned at lunch but the afternoon saw yet another comeback with all but DJ30 managing a positive close. After the pummeling it took Wednesday and Thursday, NASDAQ was primed for a bit of a relief bounce and/or some short covering ahead of the weekend, and that is exactly what it got.
The technical picture was mixed, but it held out a bit of promise. Just a bit. SP600 led the rebound, posting a 0.79% gain as it bounced off its 50 day EMA. It is trying to make that higher low in its 9 week range, and thus set up a breakout attempt from a larger 9 month cup with handle base. That helped push NYSE breadth to 2.3:1. Alas, much of the move was attributable to energy stocks that enjoyed their own relief bounce after a manhood-robbing decline over the past 6 weeks. Thus you have to look at the move with a grain of salt; positive in that the index bounced off the 50 day MA & continuing work on its bigger pattern, but driven by a beaten up sector recovering from a particularly harsh spanking.
Read "The Daily" Entire Weekend Summary
Here's a trade from "The Daily" and insights into our trading strategy:
Company Profile
Retail remains strong even after techs gave up their 2007 breakout move last week, and CROX remains strong as well. It was a new issue in February 2006, and we like new companies that are new issues because they have so much more growth potential than established retail chains. Look at CHS; it was a powerhouse from 2000 to early 2006. By 2006 it had stores everywhere it could put them and that is when earnings peaked; nowhere else for new stores and thus no growth. CROCS is still on the expansion curve and it had just formed a new base when we put it on the report, looking for the break higher from its short cup base.
The next session it broke higher on stronger volume, and that was what we were looking for to move into positions. We bought some stock at $46.30 and some June $45 call options with a 54 delta at $7.10 as CROX posted a $1 gain. When these moves start they can run quite a ways. The following session it added $1.85. Took a day off and then added $3.90 over the next two days. It closed off the high that session (Wednesday) so we were on alert if it started to show some softness the next session. It ran higher again on Thursday but could not take out the Wednesday high and then started to fade. Given the run higher this indicated a test coming. With the market iffy we decided to take some of the gain off the table. Sold some stock for $52.25 (a 12.85% gain) and some of our options for $10.40, a 46% gain. Not bad for a quick 7 day run. It tested back to near support to end the week, and with the action Friday we are actually looking at adding some positions as it rebounds off of that support. Love strong new issues that tend to make their own wake regardless of what the market does.
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 w/handle. Strong above average volume Friday as PDX broke out from a 10 month base, heading towards a new all-time high. Excellent pattern with money flow surging higher ahead of price. Great pattern and a very good sector for the current market conditions.
Volume: 346.6K Avg Volume: 249.766K
BUY POINT: $51.74 Volume=350K Target=$59.95 Stop=$49.72
POSITION: PDX EJ - May $50c (64 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. |
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3) TECHNICAL PLAY Company Profile
EARNINGS: 2-1-07
STATUS: Cup w/handle breakout. Solid volume surge Friday as DIGE surged as well, clearing a short base. Nice little consolidation of the last 2006 run after the breakout from a 6 month base. As noted last week, we are seeing this short type of pattern set up as a consolidation of that late 2006 run. Excellent break higher and looking to take some positions on a continued break higher and then again on a successful test. A biotech with a great technical pattern to go along with the pattern that is going to send it to a new all-time high.
Volume: 811.702K Avg Volume: 385.281K
BUY POINT: $52.38 Volume=400K Target=$59.95 Stop=$49.95
POSITION: QDG FJ - June $50c (64 delta) &/or Stock
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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