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INVESTMENT HOUSE.COMTM |
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Weekend Newsletter for
March 18, 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
Finish to an interesting week leaves Wednesday reversal issue unanswered.
- Overall picture remains weaker though leadership is holding up.
- CPI not falling, but after rising PPI it was a relief to investors.
- Industrial production jumps 1% but most of it was cold weather utility production.
- A further test to the 200 day SMA is still likely in this correction, but leadership is providing upside plays to go along with the downside.
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Market Summary (continued)
Well over all we had a very interesting week in the market. The low-volume relief rally from last week ended on Tuesday with a high volume sell off. Wednesday the selling continued, but intraday the market reversed on volume to close positive. Thursday and Friday was anti-climactic as Thursday the market bounced on low volume and was down on Friday on higher volume to close out the week. The market was befuddled. It was expiration Friday, so there were some issues with that higher volume on Friday and indeed probably some of the volatility during the week was on account of expiration. Nonetheless we saw a couple of big moves during the week and the end of the week didn't resolve what that Wednesday reversal meant. It is something that indicates this leg is over, or are we going to sell off further? Thursday and Friday didn't answer that question, and we'll know more this coming week. As we discussed Wednesday night we have our suspicions as to what that day meant.
The overall picture still remains negative. We are in a correction; that has not changed. What happened this week was another down leg that looks like the beginning of another down move in this correction. Wednesday was a reversal off the session lows, but the indices finished the week below the 10 day moving average, and that's where near resistance is and that's where the move last week stalled.
We still have an overall negative picture when you look at the internals. Sure they were talking about the internals being good on Thursday, but when you look at the week over all, the internals were very poor. They were heavily biased to the downside and the negative internals were far stronger than the positive ones. For example, when you look at the internals, i.e. down volume to up volume during a bad day and when you look at the advance/decline during the negative days, they overwhelmed the positive days.
Read "The Daily" Entire Weekend Summary
Here's a trade from "The Daily" and insights into our trading strategy:
Company Profile
Upside/downside.
It is that kind of market right now as the 7 month rally corrects to set up a new move. Despite the up and down action there are still several sectors that sport strong leaders that are moving higher. The downside areas are vicious and yielding fast gains. Our trademark is 'take what the market gives,' and we can do both in this market.
Downside: CSE. When the market corrects there are plenty of downside moves, but there are always downside leaders just as there are upside leaders in an upside run. This correction is fed in part by worries regarding financial stocks, particularly those relating to mortgage lending. The fear has spread out, however, and is impacting other lending areas. CSE is one such 'other' area. It was in a weak pattern already, having double topped in December and February. It dumped lower and then recovered to test the 200 day SMA. We love to play the fade after a rebound to test resistance. We saw it tap resistance and start to fade. That is when we put it on the report. The next session (3-12-07) CSE started lower on very strong volume. We moved in with some April $25 strike put options at $1.45. The following session it gapped lower, losing $0.86 on the close. The next session (Wednesday), it gapped lower once more and screamed down to $22.39 on the low. That was $2.10 in less than 2 days. That hit our target price and then some, and when it started to reverse we took the gain, selling the puts for $2.15, a 48% gain. When the downside hits and stocks rocket lower they tend to rebound sharply as well. That is why after 3 fast downside moves we took the gain. Sure enough CSE rebounded back to the 10 day EMA to end the week. If it fails there we will be ready to play the downside once more as it moves lower in its continuing downtrend.
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
EARNINGS: Announced 3-13-07
STATUS: Ascending base. Split in mid-January and after its run it needed a rest. Thus the current base that is making higher lows and not giving up any of the gains. Announced earnings last week, and while they did not break BKE out of its 13 week base, they did not send it spiraling lower. Indeed, it held the 50 day EMA (34.25), making a higher low in the base as it goes about its business setting up for the next breakout and new high. It is a strong performer but want to see it clear the recent highs on strong volume to show us that the buyers are back in and ready to really drive it higher.
Volume: 180.1K Avg Volume: 157.465K
BUY POINT: $35.94 Volume=235K Target=$41.38 Stop=$34.25
POSITION: - Stock (no option chain)
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
Upside/downside.
It is that kind of market right now as the 7 month rally corrects to set up a new move. Despite the up and down action there are still several sectors that sport strong leaders that are moving higher. The downside areas are vicious and yielding fast gains. Our trademark is 'take what the market gives,' and we can do both in this market.
Upside: BTJ. Energy remains a strong sector, rallying the past several weeks after a correction. Some stocks held up well, however, and BTJ is one. It set up a 12 week reverse head and shoulders base and broke out in late February. When it made the test to start March we started looking for an opportunity to get in. After tapping the 50 day EMA it bounced on 3-6-07. We put it on the report and it was moving higher again the following session. We moved in at $25.18. The next session it gapped higher and added $1.45. Another gap and another $1.61 the next. Then $2.08 the next. On 3-13-07 it rallied once more, but after 5 straight up sessions it was running out of gas. When it started to reverse we took some gain at $30.82, banking a nice 22% on this run. It managed to hold and even added another dollar to end the week. Powerful move, rallying when the market struggled. That is what we are talking about when we write about strong leaders in good position to rally even as the market corrects. They are out there and we specialize in finding them.
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
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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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