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us stock market, stock watch
Begin Part 2 of 2
With no scheduled news Monday, the main impetus will be analyst comments and the market's momentum. As noted above, it appears that the Dow and S&P are in for a test of their 50 day MVA as they did in December. Positive earnings reports may act as the trigger to get things moving back to the upside. Overall the price/volume action remains good even if there is some more uncertainty economically. The market sensed a bit of that last week, and we will know more this week when we see how the indexes handle their 50 day MVA and the associated volume. The economic forces discussed above are not immediate effects; yes Greenspan rekindled some fears that had died down. Perhaps they will wake us up to do the right thing for the economy, but in the short term we will not see the effects of any Japan-style problems other than the uncertainty regarding the recovery that has been reinjected. That may be a good thing if fear rises again; the market has been getting too complacent and bears getting too rampant.
Support and Resistance
Nasdaq: Closed at 2022.46.
Resistance: The index set some new bars for itself. The December intraday high remains unconquered (2065.69), but it now also has the January intraday high at 2098.88. The up trendline is at 2135. Then 2250 to 2300. Again, there is not a lot of specific resistance.
Support: The 18 day MVA (2005.90) and 2000 represent the next level of potential support. The March 2000 down trendline is right at that level as well. the we look down to the 50 day MVA (1938.19) is right in the middle of a range of support from 1934 to 1941 (the tops of the November consolidation).
S&P 500: Closed at 1145.60.
Resistance: We would say 1150, but that has been broken so many times it is weak. After that the 200 day MVA remains the key resistance level at 1167.11. Then the December high at 1173.62 followed by the hump in the March double bottom at 1183.35.
Support: The 50 day MVA at 1139.83 is the next level. It is just above prior price consolidations at 1125 that acted as good support in prior tests.
Dow: Closed at 9987.53.
Resistance: The 200 day MVA is still the level to cross once again (10,102.80). then the early January highs at 10,300. 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 10,515.
Support: The 50 day MVA at 9907.39. After that, 9.750 is some support and then 9500 is solid support.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
1-15-02
Retail Sales, December (8:30): -1.1% versus -3.7% prior.
Retail Sales ex-auto, December (8:30): 0.0% versus -0.5% prior.
1-16-02
CPI, December (8:30): 0.1% versus 0.0% prior.
Core CPI, December (8:30): 0.2% versus 0.4% prior.
Business Inventories, November (8:30): -0.5% versus -1.6% prior.
Industrial Production, December (9:15): 0.0% versus -0.3% prior.
Capacity Utilization, December (9:15): 74.6% versus 74.7% prior
Fed's Beige Book (2:00)
1-17-02
Initial Claims, (8:30): 395K versus 395K prior.
Housing Starts, December (8:30): 1.610M versus 1.645M prior.
Building Permits, December (8:30): 1.570M versus 1.595M prior.
Philadelphia Fed, January (12:00): 0.0 versus -12.6 prior.
1-18-02
Trade Balance, November (8:30): -$28.5B versus -$29.4B prior.
Michigan Sentiment-Preliminary, January (9:45): 89.6 versus 88.8 prior.
THE PLAYS:
Good movers: URS continued its breakout Friday on stronger volume, putting in a strong move. PCS is still heading down; our target is 17.50.
We still like these; see the Thursday update for buy points:
MOSY: Holding the ascending wedge on low volume.
DKWD: Ditto.
MONE: Hit the 5% limit for buying on breakouts so looking for a pullback.
PSFT: Still holding above the 18 day MVA in its consolidation but volume was up and just above average with the stock revealing a doji in the middle of the intraday range.
Other stocks that were removed from the report to a watchlist:
Puts: All still weak. PLCM, QCOM, CL. TTN still looks good for a move down to 21. Will watch QCOM for a move up to the 18 day MVA and retreat.
Upside:
RCOM: Still waiting for it to move off the 50 day MVA.
ACXM: Was not a strong move up after testing the breakout and now is pulling back again; not a bad pullback.
PRSF, EGOV: A bit of weakness after the breakout but not bad.
MFLO, DSTM: Testing breakouts on decreasing volume.
AWRE: At the 10 day MVA and looking ready for another bounce but got some selling Friday. Can test the lower 18 day MVA but we like the hold above the December highs. Aggressive buy point at 9.25.
COST: Fell below the 18 day MVA in the handle to its double bottom. Volume was lower; all is not lost but we are watching the retailers closely for a downturn.
IOM: Not a good move in the ascending wedge, falling below the 10 day MVA. Held the 18 day MVA and can still break out, but this was some selling, not the lower volume pullback we wanted.
EMLX: Pulling back to the 10 day MVA on decreasing volume; looks good still but may fall back a bit more (1-2 days) before moving up again.
ASIA: Volume too strong on the pullback, but its holding above the short terms in the test of the breakout. If it cannot hold we have to exit.
SUPG: Below the 18 day MVA in the handle; too far in the pullback.
EDSN: Still testing the breakout and holding above 20; erratic price/volume action.
Best Plays:
1) MROI: Ready for a move up in the ascending wedge.
2) LXK: Bouncing back up in a handle.
3) WW: Ascending wedge, at support on low volume.
4) VIP: Breaking out!
5) AXCA: Breakout to a new high.
6) GSLI: Testing the breakout.
7) FORG: Ready for a breakout!
8) SHLM: Breakout!
9) APC is falling like a rock.
10) KLIC: Nice test of the breakout.
New:
Covered Call:
BORL (Borland--$16.23; -1.22; optionable): Software
http://biz.yahoo.com/p/b/borl.html
STATUS: Sold down Friday after tapping at a new high (18.40). Volume was high at 2.4 million (avg. 812,000) with the stock looking ready to slice through the 18 day MVA at 16.13. Looking to sell covered calls on our long-term positions for a move down to 14, at the level of the November highs, for an initial target. The stock can find support at the 50 day MVA ahead of that at 15, so we will watch there for a potential bounce. Heavy volume on the selling. The February $15 calls were selling for 2.05 at the close Friday; on a move down to 14 they should be down to around $0.63, where we can buy them back.
BUY POINT: 16 on continued strong volume.
POSITION: February $15 calls to sell (BLQ BC).
http://www.investmenthouse.com/ct/borl.html
MROI (Mro Software--$23.34; +0.84; optionable): Applications
http://biz.yahoo.com/p/m/mroi.html
STATUS: Just off the bottom of a 22-month base, and in an ascending wedge that formed subsequent to a cup with handle breakout. The breakout was on strong volume but that has decreased in the pattern and though slightly higher Friday is still way below average at 123,400 (avg. 230,000). Friday, on this rising volume, MROI was bouncing up from the 18 day MVA (22.52). We are looking for a breakout over 25 (the December high is at 25.84). Good money flow and high relative strength. Target: 30
BUY POINT: 25.13 on volume of 311,000 or higher. Stop: 23.37 (7%)
POSITION: Stock and/or March $20 calls to buy (UPJ CD).
http://www.investmenthouse.com/ct/mroi.html
LXK (Lexmark--$58.52; +0.92; optionable): Peripherals
http://biz.yahoo.com/p/c/lxk.html
STATUS: In a cup with handle of just over 6 months, part of a 21-month base. After pulling back in the handle for 5 days LXK was just below the 18 day MVA on Thursday but with volume pushing above average Friday the stock was back over that resistance (1.4 million; avg. 1.3 million). It closed just under the 10 day MVA (58.68) but with continued rising volume we look for a move over that and up to breakout. That's just over the January high of 61.90. Relative strength is high and money flow trending up since October and at decent levels. Target: 74
BUY POINT: Aggressive: 59.75 on continued rising volume. Stop: 55.57 (7%). Breakout: 62.03 on volume of 2 million or higher. Stop: 57.69 (7%)
POSITION: Stock and/or April $55 calls to buy (LXK DK).
http://www.investmenthouse.com/ct/lxk.html
WW (Watson Wyatt--$21.69; -0.31; no options): Diversified Services
http://biz.yahoo.com/p/w/ww.html
STATUS: An 8-week ascending wedge that is inside a 20-week cup with the deep cut in September (highs at the start of the base are near 28 in mid-August). The wedge formed above the 50 day MVA, has upper resistance at 22, and has thrown two big spikes since December. One of those spikes was Thursday with the stock up from the 18 day MVA (21.44), and pulled back on below average volume Friday (52,700; avg. 72,000). Showing good money flow and buying, we are looking for a breakout here. Target: 27
BUY POINT: 22.13 on volume of 97,200 or higher. Stop: 20.58 (7%)
POSITION: Stock.
http://www.investmenthouse.com/ct/ww.html
VIP (Vimpel Commun--$29.52; +2.07; optionable): Telecom
http://biz.yahoo.com/p/v/vip.html
STATUS: Breaking out of an ascending wedge, off an 18 day MVA bounce on strong volume (551,500; avg. 307,000). The pattern formed in the upper right side of 17-month cup, not the base pattern at this point in such a base, but the move was strong and we can look at taking our profits once the move starts to peter out. This base is part of a larger, forming cup that is 21 months long. Shows strong money flow, relative strength breaking out. Target: 35
BUY POINT: 29.55 on continued strong volume. Stop: 27.48 (7%). Remains a buy on the breakout up to 30.20.
POSITION: Stock and/or April $25 calls to buy (VIP DE).
http://www.investmenthouse.com/ct/vip.html
NEWP (Newport--$24.37; -0.98; optionable): Scientific & Technical Instruments
http://biz.yahoo.com/p/n/newp.html
STATUS: NEWP exploded over its 200 day MVA (24.15) on strong volume early this month, and has now, on low and below average volume (794,800; avg. 970,000) pulled back to the support by Friday. The drop Friday was a little steep after Thursday's doji, but we will look for it to hold at the 200 day MVA here. Money flow and buying look good. Target on a move back over the January high (26.17): 30
BUY POINT: Aggressive: Over 25 on volume of 980,000 or higher. Stop: 23.25 (7%)
POSITION: Stock and/or May $20 calls to buy (NZZ ED).
http://www.investmenthouse.com/ct/newp.html
INVN (Invision--$27.75; +1.02; optionable): Scientific & Technical Instruments
http://biz.yahoo.com/p/i/invn.html
STATUS: A new issue that more than quadrupled its value inside 3 months and has corrected back to the 50 day MVA (24.90). At that support the stock has bounced on very low, below average volume for the last week or so, throwing an above average volume spike 6 days ago. Volume was higher Friday to 1.8 million (avg. 2.7 million) with the point gain, so the stock looks ready to try a breakout over the 18 day MVA (28.78). Initial target is at the 47 range (December high 47.09). INVN shows good money flow and buying.
BUY POINT: Aggressive: 29 on average or higher volume. Stop: 26.97 (7%)
POSITION: Stock and/or April $25 calls to buy (FQQ DE).
http://www.investmenthouse.com/ct/invn.html
Smaller stocks:
AXCA (Axcan Pharma--$14.50; +0.99; no options): Drug
http://biz.yahoo.com/p/a/axca.html
STATUS: Broke from a flat base in late November and ran to the January high of 14.58, stepping up the 10 day MVA along the way (that support is now at 14.04). Got a correction almost all the way back to the 50 day MVA (at 13, but the stock made it down to 13.33) before AXCA blasted up Friday on strong volume (232,000; avg. 79,000). We are looking for a continued move up over the high for a breakout to a new high. Huge money flow and relative strength breaking out. Target: 17
BUY POINT: 14.60 on continued strong volume. Stop: 13.58 (7%)
POSITION: Stock.
http://www.investmenthouse.com/ct/axca.html
GSLI (Gsi Lumonics--$10.19; +0.13; optionable): Scientific & Technical Instruments
http://biz.yahoo.com/p/g/gsli.html
STATUS: In a large 17-month base but is now in an 8-month cup with handle base at the bottom of the bigger pattern. Has pulled back in a handle over the last week, and Friday tapped support at the 10 day MVA (9.72) and bounced with volume rising to 60,800; average volume is 93,000. Look for a breakout over the January high at 10.75 on strong volume. The stock has huge money flow, and relative strength is high. Target: 13
BUY POINT: Breakout: 10.88 on volume of 140,000 or higher. Stop: 10.12 (7%)
POSITION: Stock and/or April $7.50 calls to buy (HQJ DU)
http://www.investmenthouse.com/ct/gsli.html
FORG (Vtel--$4.45; +0.25; no options): Telecom
http://biz.yahoo.com/p/f/forg.html
STATUS: Trying to break out of an ascending wedge that has formed since late October after FORG put in a nice run up to the November high at 4.70. The stock is in a 22-month base and the wedge is just off the lows that are around $1.00. The pattern has tightened up more recently, since mid-December, holding above the 18 day MVA (4.14), support from which FORG has bounced three times since testing the 50 day MVA in late November. The recent tightening in the pattern has held the 18 day for around 2 weeks until Friday, when volume exploded to 501,700 (avg. 245,000, no news). Price was up though it pulled off the high of 4.70; we are looking for a breakout, however. Excellent money flow and buying. Target: 6
BUY POINT: Aggressive: Over 4.60 on continued strong volume. Stop: 4.28 (7%)
POSITION: Stock.
http://www.investmenthouse.com/ct/forg.html
SHLM (A.Schulman--$15.83; +0.83; no options): Consumer non-durables
http://biz.yahoo.com/p/s/shlm.html
STATUS: Broke out of a cup with handle (the cup has that September dip) but immediately formed a lateral pattern over about a week as volume fell back. Friday the stock broke out of that test as volume screamed up to 363,100 (avg. 117,000). Thursday news of improved earnings and continued regular cash dividends helped the stock climb all day Friday. Look for a continued move up; the stock remains a buy on the move up to 16.30. Money flow and relative strength broke out to new highs. Target: 19
BUY POINT: 15.85 on continued strong volume. Stop: 14.74 (7%)
POSITION: Stock.
http://www.investmenthouse.com/ct/shlm.html
Puts: We are noticing homebuilder (retail, too) stocks hitting recent highs on lower volume, and some are selling off on higher volume. With rates moving higher we think we are going to see more selling here in a possible industry rollover. It may not just yet, but the technical signs are cropping up, and we are going to be taking money off the table if it plays out. We are looking at a couple of these stocks for puts, and want to give a heads up on PHM, DHI, LEN, and CTX in the homebuilder group, that have been on the report.
KBH (Kb Home--$37.69; -0.90; optionable): M&C: Residential
http://biz.yahoo.com/p/k/kbh.html
STATUS: Hit a lower volume high (41.44) in late December and on its pullback broke the 18 day MVA Thursday, on higher volume selling (830,700; avg. 571,000). Headed down again Friday on increasing volume, breaking below other support at 38, so we are looking for a break of the 50 day MVA (36.19) and a drop to the 200 day MVA (31).
BUY POINT: Aggressive: 37.55 on continued rising volume. Below 50 day: 36 on continued rising volume.
POSITION: February $40 puts to buy (KBH NI).
http://www.investmenthouse.com/ct/kbh.html
FLR (Fluor--$35.60; -0.59; optionable): M&C: Heavy Construction
http://biz.yahoo.com/p/f/flr.html
STATUS: Broke out to the downside from a head and shoulders pattern in April-June, tried to rise over 48 but failed and now is in a descending wedge pattern with support at the 34.80-35.00 range. Volume has been below average overall over the last month, but was back over average Friday (481,500; avg. 349,000) with the stock testing lower waters at 34.67. We are looking for a breakdown for a target at the 28 range. FLR has tried to move back over the 18 day MVA this month but with Friday's selling looks like it may be a while before it can come close to that task.
BUY POINT: Aggressive: 35 on continued strong volume.
POSITION: February $40 puts to buy (FLR NH).
http://www.investmenthouse.com/ct/flr.html
APC (Anadarko Petro--$48.96; -2.39; optionable): Energy
http://biz.yahoo.com/p/a/apc.html
STATUS: Was selling Thursday but Friday it broke off with a downside gap through support on a downgrade and on general concerns that upcoming earnings throughout the sector will sag. Volume was high at 4.4 million (avg. 2.4 million) and on the strong move we look for a drop perhaps to 44, the level of the September lows.
BUY POINT: 48.90 on continued strong volume.
POSITION: February $50 puts to buy (APC NJ). Please check with your broker for deltas.
http://www.investmenthouse.com/ct/apc.html
CONTINUED PLAYS:
TEST OF BREAKOUT:
AUDC (Audiocodes--$5.31; -0.08; optionable): Scientific & Technical Instr.
http://biz.yahoo.com/p/a/audc.html
STATUS: Still testing the breakout from the ascending wedge, and AUDC moved below the 200 day MVA the last three days of the week though it is holding in a pretty tight sideways movement above the 18 day MVA (5.13). Volume, too, has been pulling back appropriately, dropping back down by Friday to 176,600 (avg. 350,000). We like that the stock is holding above the buy point of 5.21. Will look for volume to ramp back up and break the stock over resistance for a follow-up move over the December high (5.97). Strong money flow, and buying good. Initial target: 7
BUY POINT: Aggressive: For new or additional positions, a move back over the 200 day (5.47) on above average volume. Stop: 5.16 (7% below buy point of 5.55)
POSITION: April $5 calls to buy (XRD DA).
http://www.investmenthouse.com/ct/audc.html
KLIC (Kulicke & Soffa--$19.71; -0.08; optionable): Semiconductor
http://biz.yahoo.com/p/k/klic.html
STATUS: Held the 10 day MVA (with a slight bounce and showing a doji) in the test of the breakout (ascending wedge). Volume remained well below average as preferred but was slightly up at 722,400 (avg. 1.3 million). We are looking for a hold here and/or above the buy point of 19.10 for a strong move back up. Stocks often make stronger moves up after testing breakout, and this is a good-looking test. Money flow and relative strength strong. Initial target: 25
BUY POINT: Hit our aggressive buy point of 19.85 on Wednesday before dropping back lower. New aggressive buy point: Over 20.10, hit twice, on volume in the range of 1.3 million or higher. Stop: 18.69 (7%)
POSITION: Stock and/or March $17.50 calls to buy (KQS DW).
http://www.investmenthouse.com/ct/klic.html
LNOP (Lanoptics--$7.67; -0.23; no options): Software
http://biz.yahoo.com/p/l/lnop.html
STATUS: Holding above the buy point of 7.63 the last 2 days (after closing below it on Wednesday); LNOP broke out of an ascending wedge and while we didn't like that precipitous drop, we do like that volume has fallen back to low levels in an orderly manner, and for 2 days price has gotten in line with that action. Showing a loose doji Friday off a tap of the 10 day MVA (7.42), we will look for a hold and move back up soon. Good money flow and buying. Target: 10.50 (almost hit the previous target at 9 on the breakout high of 8.72).
BUY POINT: Aggressive: 8 on volume in the range of 46,000 (Friday's volume 15,400; avg. 45,000). Stop: 7.44 (7%)
POSITION: Stock.
http://www.investmenthouse.com/ct/lnop.html
WEDGES, PENNANTS, and FLYING PLATEAUS (AND FLAGS): These are some of our favorite patterns as the moves can be explosive. In this market, however, we need to see the move on the breakout on strong volume.
KANA, formerly KANAD (Kana Comm--$26.95; -2.21; no options): Internet Software
http://biz.yahoo.com/p/k/kana.html
STATUS: Gave a strong breakout and is now testing the move, pulling back the last three days on decreasing volume, that dropped below average the last 2 days of the week (Friday to 454,600; avg. 500,000). It is being very stingy with its gains, a good sign. Showing a tight hammer doji, KANA may not pull back all the way to 25 in the test, but that is always a possibility. We will look at getting into some aggressive positions on the test of the breakout once it does hit support and bounces. After the strong breakout, we will look for strong gains after the test. Target: 34
BUY POINT: From here: Over 27 on above average volume. Stop: 25.11 (7%). Continued pullback: After holding 25 on a lower volume test, a move back up on strong volume.
POSITION: Stock.
http://www.investmenthouse.com/ct/kana.html
BASING/TRADING RANGES:
VAST (Vastera--$15.80; -0.10; optionable): Information Technology Software
http://biz.yahoo.com/p/v/vast.html
STATUS: VAST is in an 11-month cup with handle that is inside a larger base. Still consolidating in the handle and holding above the 18 day MVA (15.79) with a tight doji. Volume spike hugely on Wednesday with the stock not making much of a move. That can mean an upside move is coming, so we are looking for a continued hold at this support. If it falls below the 18 day, we will put it on the shelf. Volume was down Friday to 365,900 (avg. 318,000). Huge money flow and good buying. Target: 22
BUY POINT: Aggressive: Over 16.50 on continued strong volume. Stop: 15.35 (7%). Breakout: 18.73 on volume of 407,000 or better. Stop: 17.42 (7%)
POSITION: Stock and/or April $15 calls to buy (AQY DC).
http://www.investmenthouse.com/ct/vast.html
RECN (Rscs Connection--$25.90; -0.65; optionable): Business services
http://biz.yahoo.com/p/r/recn.html
STATUS: RECN is forming its ascending wedge as a handle to a 7-month cup base, not the preferable handle to a cup, but we have been interested by the low-volume shakeout and the volume spike last Thursday. Volume dropped back dramatically Friday (163,600; avg. 278,000), with RECN holding above the 18 day MVA (25.74). We are continuing to watch for a bounce and move up based on the price/volume action last week. If it cannot hold, we will move on. Target: 34
BUY POINT: Aggressive: 26.75 on above average volume. Breakout: 28.38 on 417,0000 or higher. Stop: 26.39 (7%)
POSITION: Stock and/or March $25 calls to buy (QRG CE; no open interests).
http://www.investmenthouse.com/ct/rcen.html
Continued Puts:
PPG (Ppg Industries--$51.05; -1.69; optionable): Conglomerates
http://biz.yahoo.com/p/p/ppg.html
STATUS: Continued lower after Thursday's break of support (50 day and short term MVAs) with volume higher but PPG holding support at he 50 range. It has not yet hit our buy point for the support break and may bounce back up to test the broken support (now resistance) before making the big fall (the kiss good-bye). Volume was up to 861,500 (avg. 651,000) with the stock closing near its low of 49.92. Continue to look for the break of support for the fall to the 46 target.
BUY POINT: Below support: 49.75 on continued rising volume. From the 50 day MVA (51.82): 51 on strong and rising volume.
POSITION: February $55 puts to buy (PPG NK)
http://www.investmenthouse.com/ct/ppg.html
Good Investing!
Jon L. Johnson and your Technical Traders Report Team
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 in 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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