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Begin Part 2 of 2
THE PLAYS:
Reading the Plays: Please note that when we reference the 10, 18, and 50 day moving averages (MVA), those are exponential moving averages (EMA). The 200 day moving average is always simple (SMA). We will note when we reference a particular MVA differently, e.g., a simple 50 day MVA. Please click on the Yahoo and chart links for company and charting information. A "prior high" refers to the high at the start of a base.
For conserving space on listings of stop losses, the symbol (7%) indicates that the stop is 7% below the buy point.
Good movers: Breakout move from RESP (just want volume to pump higher)! BUD made its move, which was made on strong and rising volume. Look for the breakout (see the weekend report for buy points)!
Stocks/Indexes from the Saturday report:
TYC: Closed 4 cents over the 200 day MVA, support it broke Friday on big selling. We were looking for TYC to move back up to that level and then fall (the kiss good-bye), but it got some help (strong volume) Monday. We will see if it can hold.
TTWO: Volume was lower and the stock still looks good in the handle to its cup.
IGT: Dropped to 64.26 on the low, while we were looking for a move down to the 50 day MVA at 63.16. Closed back over some price support from December at 65, but if it cannot break through the resistance, continued to look for the completed correction to the 50 day MVA. Hit call sale point of 66.
EBAY: Closed just under the 50 day MVA with a hammer doji. After the recent pullback/selling, that can signal a move back up, but volume was lower on the climb. The stock has to get back over the 50 day MVA (64.07). Earnings are out tomorrow after the bell, and the lack of a continued drop today made the play tougher. If it falls tomorrow ahead of earnings we will most likely go ahead and exit before the close.
BUD: Looks like it wants to make the breakout! The stock headed up from support in the handle, and on good volume in a solid move in the test of the breakout (pennant).
Continued Plays:
ITWO: A tight doji at the 18 day MVA on low volume; testing the breakout.
OLGC: At support in the test of the breakout; low volume as well.
SBUX: Held with a doji above the 10 day MVA in its test of the breakout.
VRTS: Below the 200 day MVA on some selling.
WMT: At key support, the 50 day MVA. We want to see if it can bounce once again from the 50 day as it did in mid-December. If it breaks below on high volume that is a bad signal for the market as a whole as it will show investors are not buying into the recovery as much (pardon the pun) despite good WMT news.
Best Plays:
1) MEDQ: Good handle on that cup.
2) SEBL: Tight doji on low volume in a handle.
3) LRCX: At support in a handle.
New:
MEDQ (Medquist--$29.25; -0.15; optionable): Healthcare Info Software
http://biz.yahoo.com/p/m/medq.html
STATUS: In a cup with handle base of 6 months. The handle is showing steadily decreasing volume as price Monday held support at the 18 day MVA (29.09), down to 37,400 (avg. 111,200). This is exactly the kind of price/volume action we like to see in handles, and look for a move up and breakout over the January high at 31.55. This is a cup with handle inside a larger cup base of 18 months (cup followed by a cup with handle). Money flow and buying are solid. Target: 38
BUY POINT: 31.68 on volume of 167,000 or better. Stop: 29.46 (7%)
POSITION: Stock and/or May $30 calls to buy (QQU EF; 75 open interests).
http://www.investmenthouse.com/cd/medq.html
Update:
SEBL (Siebel--$34.15; -0.79; optionable): Application Software
http://biz.yahoo.com/p/s/sebl.html
STATUS: SEBL is pulling back in another consolidation as volume remains below average (15.9 million; avg. 17.9 million). This consolidation is necessary after a good move to clear the 200 day MVA (now at the level of the 18 day MVA at 31) early in the month. The intraday low of 33.57 tested near the 10 day MVA before the stock closed back up with a tight, star doji. It may try to test the 200 day MVA completely before the next run, but we won't be surprised if the stock moves up from here after an intraday test lower tomorrow near 33. SEBL is showing solid money flow and buying. Target: 43
BUY POINT: Aggressive bounce: After a test of the 33 level, a break back over 34.25 on volume of 20 million or more. Stop: 31.25
POSITION: Stock and/or May $30 calls to buy (SGQ EF).
http://www.investmenthouse.com/cd/sebl.html
LRCX (Lam Research--$25.63; -0.15; optionable): Semiconductor
http://biz.yahoo.com/p/l/lrcx.html
STATUS: After breaking out over its 200 day MVA (25.15) and reaching a January high at 27.10, LRCX has pulled back on overall below average volume in the handle to a 5-month cup base. Showing a doji at support Monday (10 day MVA, 25.51), volume was sharply higher, however, at 2.66 million (avg. 2.5 million). This is another volume spike in the handle that finished in the upper half of the sessions trading range (the previous one was on Thursday); normally we don't like volume spikes in handles, but these are somewhat positive as they show buyers are coming back in and driving the price back up in the trading range for the close. We like the looks of the doji above the support (the stock tapped the 200 day MVA on the low of 25.14), and look for a breakout over the high. Money flow and relative strength are at good levels. Target: 33. The cup with handle is off the lows of a 21-month base.
BUY POINT: Breakout: 27.23 on volume of 3.75 million or higher. Stop: 25.32 (7%)
POSITION: Stock and/or March $22.50 or $25 calls to buy (LMQ CQ or CE).
http://www.investmenthouse.com/cd/lrcx.html
PORTFOLIOS: Each report, we look at these to see which is in a buy position. We don't cover them all each time, just the ones that look ready to pick up a few shares.
THE LEADERS: ACS, NVDA, DGX, FRX, LLL, CACI, KRON, MIK, BMET, APPB, LOW, MYL, IGT
Put Play:
LOW (Lowe's Companies--$42.76; +0.73; optionable): Retail
http://biz.yahoo.com/p/l/low.html
STATUS: LOW fell below the 50 day MVA Friday, and Monday with volume falling moved up but did not re-take the moving average, closing just under it (42.99). Lower volume recoveries that tap at the support just broken often is the 'kiss good-bye' before further selling (4.7 million; avg. 4.5 million). On a move back below 42 (the intraday low Monday was 42.15, and LOW closed at 42.03 Friday), we will look at playing the stock down to the 200 day MVA (36) with puts. Potential support at 39.50. If it does not recover, we will exit any remaining upside positions.
BUY POINT: 42 on rising volume (preferably).
POSITION: April $45 puts to buy (LOW PI). Check with your broker for delta.
http://www.investmenthouse.com/cd/low.html
APPB: Another put play: knifed lower through the 50 day MVA on strong volume and if it cannot hold at 33, the 200 day MVA is at 30 (closed at 33.55). On a test of 33.75 and failure to close back over that level, we will look at downside action with February $40 puts to buy.
LLL: Hit the 50 day MVA and closed with a hammer doji on news of a big acquisition. Higher volume indicates some support at that level. Still working on the base, but the fact that it held at the 50 day MVA today is a good sign it will continue to form the cup for the next breakout.
FRX: A volatile handle; was back down over a point on strong volume. The star doji means a fight between buyers and sellers. Earnings are out Tuesday before the bell and that could be the deciding vote on which way this one goes from here.
CACI: Lost the ascending wedge on some selling, and is headed for the 50 day MVA at 37.50 range where it has support. Want to see it hold that support if it makes it down that far.
BMET: Was back over the 50 day MVA in a weak move. Step one.
ACS: Won't give up easily. Even lower volume and a star doji that on the low tapped support at the 10 day MVA; we have been waiting for a climax run, and the next rally might give it to us. 18 day MVA is at 104.43.
MIK: Broke the 50 day MVA as expected, volume higher as the stock bounced back from a low at 28.50. Want to see a quick move back over the 50 day, but this is one stock we are watching carefully. If it cannot make it, exit upside positions. Has been a great run for the retailers, but under pressure.
NVDA: Tanked to the 50 day MVA, our target for the covered call sale play. Volume has been up on the selling, and we are wondering if the 50 day MVA is going to hold. May be some intraday selling tomorrow below that level (59.50) before a recovery. If we get morning downside action that holds above 55, we will probably close out the call position (great drop in price). If we get a good bounce at the 50 day MVA, will be the point at which to buy back the calls.
UP & COMERS PORTFOLIOS: BBBY, KKD, NDN, SRCL, EBAY, KG.
KKD: Down to the 50 day MVA on higher volume (still below average and the stock tried to bounce back up). It is from this support that KKD made its last nice run up in December. We will see what it does after a day or so if it can hold here.
BBBY: Continued on rising volume down toward the 50 day MVA at the 32 range. Volume still well below average, so may hold up here.
SRCL: Turned back down today on slightly lower volume as it continues to consolidate. Friday's move just did not have the volume to make the move. Still very low consolidation volume and price/volume action is decent.
NDN: Broke the up trendline on strong and rising volume after falling through the 50 day MVA Friday. We are out.
EPIQ: Could not make the move back over the 50 day MVA, so we are out. Heading for the 200 day MVA (17.54) which may support it for a "get-out" bounce back up to the 50 day MVA (19.41).
MEMBER PORTFOLIO: BRCM, CHKP, AMAT, JNJ, MSFT, AOL, BUD, PXLW.
BRCM (Broadcom--$47.98; -1.34; optionable): Semiconductor: Integrated Circuits
http://biz.yahoo.com/p/b/brcm.html
STATUS: Barely cleared a cup with handle with handle base on base and started to pullback late last week. Has pulled off the January high (53.35, reached on the most recent peak in the pattern, with volume falling off to below average levels the last 2 days (13.4 million Monday; avg.15.2 million). Holding support at the 10 day MVA on the rising volume, we could get a test of the 18 day MVA (46.32) before the stock heads back up. It is holding up pretty darm well given the market action. Looking for a breakout over the high, but stronger resistance may be at the 50 range, near the November and December highs. Target: 62
BUY POINT: Aggressive: Over 50 on volume of 14 million or higher. Breakout: 51.56 on volume of 20 million or higher. Stop: 47.95 (7%)
POSITION: Stock and/or May $45 calls to buy (RCQ EI).
http://www.investmenthouse.com/cd/brcm.html
MSFT: Hanging on by a hair above its 18 day MVA. Price/volume action was better Monday with the pullback on lower, below average volume. At least it is holding steady while the rest of the market sold. One of those big names that is just biding its time. We will see for what soon.
CHKP: Surprising drop back to the 18 day MVA, tapped on the low of 43.75. Volume strong on the selling; the stock can break support here and the 200 day MVA (43.22) if this continues. Earnings are out Tuesday before the opening bell. Looked like pre-earnings nervousness.
AMAT: Held support at the 10 day MVA on strong volume, showing a doji on the closing price (45.31). Off the high of 46.69, but if INTC has some good news tomorrow on earnings, AMAT could head up from here. Buy point for aggressive positions is over 47. Held up well as well.
JNJ: Clawing back over the 50 day MVA three days ago, and Monday popped up from the 18 day MVA on slightly higher volume. No news.
Good Investing!
Jon L. Johnson and The Daily 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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