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us stock market, trade stock
Begin Part 2 of 2
TEAM TRADES
SEBL: Yes, as we said Thursday night, we were looking for more from SEBL on Friday as the stock just ran from 58 to over 100 in a week before this last selloff, and since it was back at support showing another doji, we wanted that move again. Point: if you have identified a winner with a pattern, JUMP ALL OVER IT. It is better to know 3-5 stocks well and consistently make money on them than try to keep up with 30 stocks.
SEBL gapped higher, back at the 66 level, about $2 above its high Thursday and $2 ahead of where it traded after hours that day. It sold back to 64.50 in the first 10 minutes, and we were sorely tempted to jump right in as it found support at that level and turned back up. Highs on the previous day often act as support on a stock's first test of the day. Wish we would have done it, but we opted to wait and see how things worked out in the first hour. We watched it run all the way to 67.50 in the first 40 minutes before it started to pullback. It then turned back down and in the next 10 minutes dropped to 65.50 where it immediately bounced back up to 66.75. It was very volatile, but it was holding at 65.50.
The stock was in the 65 to 66 range and the February $55 options (better delta and good open interests) were trading around 18 by 19 to 19.38. We dropped an order in at 19 as we saw ask prices at that level. That worked out well. The stock started up from there and ran to 69.50 before testing 68 briefly around 11:00 CT. At this point we had entered a stop loss at 17, waiting for the move up. The stock then bounced and ran up to 70.75. We started to modify our stop order when the stock dropped to 69. It moved bounced back up to 70.75 about 15 minutes later. The options went back up to 22 by 23. At that point we moved the stop limit order up to 21, happy to make $2 on the trade. We also thought that the immediate turn back up would lead to a breakout over 71. Then the JDSU news hit, and the market hiccupped. The stock started to drop and we were hit before we knew it on the order.
Not over for the day, however. While tending other business, we kept watching what was happening. We saw SEBL hit 66 again and bounce sharply. The options were back at 18.62 by 19.62. We put in a limit order at the ask and were filled. The stock kept on going up, but tested the pullback once with a touch to 67. It then went on up, hitting 73 with about a half our left. When the stock cleared 70, we put in a stop limit at 20 (options selling for about 22). It then turned down from 73, and we were concerned about some selling in the last half hour before the holiday. Plus we had a good gain. The options were trading about 23 by 24, and we moved up the stop order to 22. When we saw the selling continue, we went ahead and just entered a sell order for 22. It missed us on the way down, and we were trying to change the order when the stock bounced at 71 and took out the trade on the way back up. Too bad because the stock shot back up to 73.50, and we saw the options at 23.62 on the bid toward the close.
This was unusual to get this chance. SEBL is one of the stocks we really like to trade because it can rip off $50 in this market (either way). That is why we kept watching it. We would have been happy with the first trade given the market conditions, but when we saw the bounce after some questionable news (JDSU) started the market selling we felt it was another play ready to be made. We were lucky to see it, and we only did because we were watching. Even without that trade we did exactly what we wanted to do: hit a nice single and brought home some more money in a tough market. That is what we are talking about: look for those ripe market conditions (up or down) as we had today, pick the plays you like, know when you want to get in, take a reasonable gain, get out.
For a review of frequently asked questions, please use the link below:
http://www.investmenthouse.com/1questions.htm
THE PLAYS:
All prices reflect prices at the close on Friday.
BEST PLAYS:
1) MRCY - Another strong move
2) SFNT - Racing up on strong volume
3) BRL: Looks ready to break out of the cup with handle.
4) AREM: Ready to roll up on stronger volume.
5) BEC: Getting close to a handle breakout.
6) CYTC: Moving up well in the handle.
7) Puts: ADBE, BEAS, ITWO
BREAKOUTS:
New Play:
SFNT (Safenet Inc--$46.69; +6.75; no options): Software
http://biz.yahoo.com/p/s/sfnt.html
STATUS: Moving up on strong volume, breaking out of a double bottom pattern on Friday (breakout point over the middle 'hump' at 46.63). Volume rose to 156,800 (avg. 88,727), sufficient for the breakout (we like 1.5 times average). The stock is moving up in its 7-week base (prior high at 53.50). SFNT shows strong money flow and a relative strength that has broken out ahead of price (bullish sign). Good buying.
BUY POINT: A continued move up on continued strong volume.
POSITION: Stock.
TESTS OF THE BREAKOUT:
Continued Plays:
PFGC (Performance Food Group--$49.50; +0.75; no options): Food Wholesale
http://biz.yahoo.com/p/p/pfgc.html
STATUS: Another defensive stock pulling back as the techs rally, getting into another good buy point. Remains above support (10 day MVA at 48.75) on a test of the breakout from the stock's recent cup base (the stock reached a high of 53.50 on the breakout and is in a 4-day pullback). A good, low-volume test of the breakout (128,700; average 137,000). Let the stock break over 50.50 for taking aggressive positions on a move up. Strong money flow and excellent buying.
BUY POINT: Aggressive: A move over 50.50 on rising, above average volume.
POSITION: Stock.
MRCY (Mercury Computer Systems--$45.69; +6.94; optionable (QYR)): Telecom equipmt
http://biz.yahoo.com/p/m/mrcy.html
STATUS: Couldn't sustain Monday's strong move up, instead pulling back to the 18 day MVA (39.81) by Thursday. That set the stock up for Friday's breakout move, as strong volume broke the stock over Monday's closing high of 45.63. A good test of the breakout and move up; this is where some big gains are made on breakouts. The stock has hit 47.88 and 47.75 on recent highs. We want to see that taken out. Relative strength broke out on the move as well.
BUY POINT: On a move over 47.88 on continued strong volume.
POSITION: Stock and/or February $40 calls to buy (QYR BH).
MAPS (Mapinfo Corp--$43.00; +3.00; no options): Computer software
http://biz.yahoo.com/p/m/maps.html
STATUS: Bounced back up from the 50 day MVA (35.47) after pulling back that far on the breakout test. MAPS shot back over the 10 day MVA (40.42) on above average volume (238,700; avg. 176,000). In position to take out the breakout high of 46.69, but will need stronger volume in a continued rally to get there. Look for support at 41 on a pullback.
BUY POINT: Aggressive: On further upward movement on stronger volume.
POSITION: Aggressive: Stock. Options at the $40 strike have insufficient open interests for the stock.
MMM (Minnesota Mining & Mfg--$112.94; -0.81; optionable (MMM)): Conglomerates
http://biz.yahoo.com/p/m/mmm.html
STATUS: A defensive play pulling back on lower volume. MMM remains above support (10 day MVA at 112.47) on the pullback from the recent breakout. The stock looks ready to move up from here on stronger volume (1.8 million Friday; avg. 2.1 million). The stock shows great money flow and buying.
BUY POINT: Aggressive: Up from here on continued rising volume.
POSITION: Aggressive: Stock and/or April $110 calls to buy (MMM DB).
READY TO BREAK TO A NEW HIGH:
New Play:
MEL (Mellon Financial Corp--$49.44; -0.31; optionable (MEL)): Banking
http://biz.yahoo.com/p/m/mel.html
STATUS: In a type of wedging movement, pulling back to support (10 day MVA at 49.33) Friday. Volume continued falling, reaching 1.3 million (avg. 1.9 million) as the stock consolidates. Looking for a move back up from the 10 day MVA as volume surges. The stock hit a December high of 51.94 earlier in the week, with possible resistance at 50.75 (hit twice recently). Strong money flow.
BUY POINT: Aggressive: On a move over 50.75 on 2 million shares or better.
POSITION: Aggressive: Stock and/or March $45 calls to buy (MEL CI).
BOUNCE PLAYS: These plays are fast plays after a pullback to support.
Continued Play:
CB (Chubb Corp--$86.75; +1.44; optionable (CB)): Insurance
http://biz.yahoo.com/p/c/cb.html
STATUS: Gapped up to open but made only a small move up from the opening price (86.50)and stalled at the November high (87.56), indicating the three-day pop from the 50 day MVA (81.88) may be running out of steam despite stronger volume (909,600; avg. 877,000). Look for support on a pullback to 85, after which CB can take another stab at the December high of 90.25. Good money flow and high relative strength.
BUY POINT: On a move back up after a pullback to the 85 range.
POSITION: Stock and/or April $85 calls to buy (CB DQ).
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.
Wedges:
New Play:
AVE (Aventis--$78.56; +1.81; optionable (AVE)): Drug
http://biz.yahoo.com/p/a/ave.html
STATUS: In an ascending wedge as of late September, popping up Friday from support (10 day MVA at 76.88) as volume dropped further below average to 89,000 (avg. 153,409). Pattern high is 79.94. The move up on lower volume suggests another dip back to support in the pattern, either the 10 day MVA or the 18 day MVA at 76.46. Strong money flow and high relative strength.
BUY POINT: Breakout: 80.07, on volume of 207,000.
POSITION: Stock. February and April options at either strike have insufficient open interests.
CGP (Coastal Corp--$82.94; +1.44; optionable CPG)): Energy: Pipelines
http://biz.yahoo.com/p/c/cgp.html
STATUS: In an ascending wedge showing a pattern high of 84.94. The stock moved up from support (10 day MVA at 81.17) after a two-day lateral consolidation (consecutive dojis), volume reaching average (1 million shares). Look for a continued move up on breakout volume. High relative strength and money flow.
BUY POINT: 85.07, on volume of 1.35 million or better. Remains a buy on the breakout up to 89.32.
POSITION: Stock and/or March $85 calls to buy (CPG CQ).
Pennants:
Continued Play: Average volume is lower than 100,000, but the sector has performed well in the recent market and we like the pattern.
MOND (Robert G. Mondavi--$50.63; +0.63; no options): Food and beverage
http://biz.yahoo.com/p/m/mond.html
STATUS: After dropping out of the pennant Wednesday, MOND found support Thursday at the level of its up trendline, bouncing back up into the pattern range the next day. Volume dropped back from Wednesday's selling volume, but remained above average at 73,100 (avg. 58,272). We will see if the stock can take out the pattern high (52.50) on a breakout move on stronger volume. Strong money flow and high relative strength.
BUY POINT: 52.50, on volume of 79,000 or better.
POSITION: Stock.
BASING/TRADING RANGES:
New Plays:
BRL (Barr Laboratories Inc--$72.00; -0.50; optionable (BRL)): Drug
http://biz.yahoo.com/p/b/brl.html
STATUS: In a cup with handle pattern, and back to support (10 day MVA at 71.50) in the handle as volume fell below average to 227,400 (avg. 366,000). Handle high is 75.81 (previous high in the base is 80.13). Looks ready to move up from here. High relative strength (which has moved out ahead of price, a bullish sign).
BUY POINT: Breakout: 75.94, on volume of 549,000. Remains a buy on the breakout up to 79.74.
POSITION: Stock and/or February $70 calls to buy ((BRL BN). February $75 options have insufficient open interests.
AREM (Aremissoft Corporation--$42.00; +4.66; optionable (UKM)): Software
http://biz.yahoo.com/p/a/arem.html
STATUS: In a rolling pattern between 48 and 38. The stock popped up from a Thursday doji on stronger volume (342,500; avg. 384,318), breaking over resistance to close on top of the 18 day MVA (41.87). Look for a continued run up to the 48 level on stronger volume, watching for topping signs there. Excellent buying.
BUY POINT: On further upward movement on above average volume.
POSITION: Stock. February and April $40 options had insufficient open interests (too illiquid for this stock).
ORCL (Oracle Corporation--$31.88; +2.38; optionable (ORY)): Software
http://biz.yahoo.com/p/o/orcl.html
STATUS: Bouncing up and down in a trading range from 27.50 t0 32.50. It is at the top of the range as volume has fallen below average the last two days when the stock has moved up (35.5 million; average 43.7 million). That makes us think it is falling back from here. It would have to break over 33.13 on above average volume to play the upside breakout. Otherwise we will let it fall back down to 27.50 and jump on it for the move back up.
BUY POINT: Breakout: 33.13, on volume in the range of 59 million.
POSITION: Stock and/or February or March $30 calls to buy (ORY BF or CF).
Continued Plays:
JPM (J.P. Morgan & Co--$167.88; +0.50; optionable (JPM)): Banking
http://biz.yahoo.com/p/j/jpm.html
STATUS: Continuing to watch financial stocks in relation to future interest rate cuts. JPM continues to move in its double bottom pattern with the breakout at 169. Friday the stock showed a doji on continued declining volume (1.5 million; avg. 1.9 million). So the stock may show us another test lower. Support looks good from the 10 day MVA (161.25).
BUY POINT: On a breakout over 169 on above volume.
POSITION: Stock and/or March $160 or $165 calls to buy (JPM CL or CM).
BMET (Biomet Inc--$38.88; +1.32; optionable (BIQ)): Health services
http://biz.yahoo.com/p/b/bmet.html
STATUS: Moved back to the upper level of the trading range (39) on above average volume (1.5 million; avg. 1.4 million) as we were looking for. Volume pulled back slightly, but in a sector rally BMET can carry through a breakout. If not, this is where BMET will turn back down toward the bottom of the range in 36, and we need to protect the gain. On a breakout, look for the stock to hit the buy point of 40.51 on strong, above average volume.
BUY POINT: Breakout: 40.51, on volume in the range of 1.9 million.
POSITION: Breakout: Stock and/or April $35 calls to buy (BIQ DH).
MER (Merrill Lynch & Co--$63.56; -0.44; optionable (MER)): Brokerage
http://biz.yahoo.com/p/m/mer.html
STATUS: Consolidating just below resistance of the 50 day (64.41) and short term moving averages for six days, after pulling back from the upper level of its ranging pattern at the 73 level (lower level has been the 200 day MVA, currently at 60.54). Volume remained right around average levels all week, pulling down just under that Friday (4.5 million). Looks like the stock is priming for a move up from here in a sector rally, showing a doji on the slight pullback. Let MER break over the high of 64.63.
BUY POINT: Over 65 on above average volume.
POSITION: Stock and/or April $62.50 or $65 calls to buy (MER DZ or DM).
BEC (Beckman Coulter Inc--$40.00; +0.31; optionable (BEC)): Electronics (scientific/technical instruments)
http://biz.yahoo.com/p/b/bec.html
STATUS: Up slightly from support on stronger volume (235,200; avg. 207,000) as the stock consolidates in the pennant that is the handle of its cup base. Look for a breakout over the handle high of 41.88 on above average volume in a continued tech rally. Steadily uptrending money flow and high relative strength.
BUY POINT: 42.01, on volume of 279,000 or better.
POSITION: Stock. February $40 options had insufficient open interests (too illiquid for this stock).
CYTC (Cytyc Corporation--$61.00; +2.06; optionable (YQK)): Electronics
(scientific/technical instruments)
http://biz.yahoo.com/p/c/cytc.html
STATUS: Continues to wedge in the handle to its 5-month cup base, finding support on the dips at the 50 day MVA (37.90). The stock moved up from there Thursday and Friday, ending the week on higher, just above average volume (687,600). Look for the breakout over the handle high at 64.50 in a tech rally.
BUY POINT: 64.63, on volume of 1 million or better.
POSITION: Stock and/or February $60 calls to buy (YQK BL).
PLT (Plantronics Inc--$46.44; +1.88; optionable (PLT)): Telecom
http://biz.yahoo.com/p/p/plt.html
STATUS: Found support at the 50 day MVA (43.58) after a 7-day handle pullback and moved up the last two days of the week on lower but still above average volume (by Friday, 415,300; avg. 318,000). Look for a continued move up toward breakout (handle high is 51.50) from the double bottom base, but on stronger, rising volume. The stock shows good money flow and strong buying.
BUY POINT: Aggressive: Up from here on rising volume. Breakout: 51.63, on volume of 477,000 or better.
POSITION: Stock (too few open interests on February options below the $55 strike).
PUT PLAYS:
New Puts:
ADBE (Adobe Systems Inc--$65.69; +5.88; optionable (AXX)):
http://biz.yahoo.com/p/a/adbe.html
STATUS: ADBE ran up to the 18 day moving average on its close, but it was on lower volume (2.5 million; avg. 3.6 million). Moreover, ADBE faces its down trendline at 67.80. Coupled with the low volume, we think ADBE will turn back down as down trendlines have stopped most moves this fall.
BUY POINT: On a failure to break and hold over 68.
POSITION: February $70 puts to buy (AXX NN) on the turn back down.
BEAS (Bea Systems Inc--$72.25; +11.75; optionable (BUC)): Software
http://biz.yahoo.com/p/b/beas.html
STATUS: BEAS bounced off the 200 day MVA Thursday, continuing the move up Friday on lower volume (11.6 million; avg. 10 million). The stock is approaching its down trendline at 75, and if volume fades we anticipate this down trendline will turn the stock back down.
BUY POINT: On a move down from the trendline at 75 after the stock runs up and tests the resistance.
POSITION: February $75 puts to buy (BUC NO).
ITWO (I2 Technologies Inc--$54.00; +10.69; optionable (QYJ)): Software
http://biz.yahoo.com/p/i/itwo.html
STATUS: Ran up above the 18 day MVA (52.54) in a two-day rally, but Friday's move was on lower, below average volume (9.7 million). The stock is approaching its down trendline at 59, and we expect that to turn the stock back down if volume continues to decline.
BUY POINT: On a test of and then move down from 60 on stronger volume.
POSITION: February $65 puts to buy (QYJ NM).
Continued Put:
ALXN (Alexion Pharmacueticals--$62.34; +5.21; optionable):
http://biz.yahoo.com/p/a/alxn.html
STATUS: Tapped its down trendline on the high of 64, as the stock moved up on lower volume (262,700; avg. 282,363). Having consistently turned down from that resistance since breaking below the 200 day MVA (73.98) over a week ago, the lower volume suggests the same action. The stock may move up to the trendline before heading back down again to the 60 level.
BUY POINT: A move down from 64 on stronger volume.
POSITION: February $65 puts to buy (XQN NM) (very low open interest, so when selling it is not advisable to rely on stops).
Good Investing!
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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