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us stock market, trade stock
Begin Part 2 of 3
TEAM TRADES
We were again looking upside and downside today. KSWS had a great pattern and gave us the upside move.
KSWS: Retailers have had a stellar run. Some are flagging, but others have set up good patterns and are ready to make a run as well. The shoe makers were looking good, and KSWS gave us a breakout today from its cup with handle set up over the past 5 months. The stock showed a good move up in the handle Friday, presaging today's breakout. The stock started well, but ran into 35.60, a point it could not break for three hours. Then at 10:30 CT it launched higher, taking out our buy point at 36.02 on a huge volume surge. We love that: pressure building at a constant high, then it blows higher on a huge volume surge. We were ready, and after the alert, set a limit order a bit ahead of the ask (then at 36.25). The trade was done inside that level at 36.20, and the stock continued a steady rise, bouncing up off the 15 minute MVA all session and closing near 37.40. Wish all trades today worked this well.
THE PLAYS:
BONUS PLAYS: SVM still looks good, and MANH hit the downside buy point but we are looking for volume.
GPI (Group 1 Automotive--$26.00; -1.75; optionable): Auto dealerships.
http://biz.yahoo.com/p/g/gpi.html
STATUS: GPI is back at the levels of its October-December lows, made between its double tops at 34. The pattern is a head and shoulders, and after dropping hard through its 200 day MVA (26.65) last week, GPI tried a relief bounce at the neckline (26) that failed at its 10 day (27.77). From that resistance the stock dropped again today, hiting down to 25.31 at its low but holding to close at the support at 26, as volume climbed to 285,000 (average 258,500). Looking for a continued drop down with strong selling volume, targeting 22 on a breakdown.
BUY POINT: Below 25.50 on increased volume.
POSITION: March $30 puts to buy (GPI OF - very low open interest).
MCSI (Mcsi Inc--$20.85; -2.26; optionable): Computers wholesale.
http://biz.yahoo.com/p/m/mcsi.html
STATUS: MCSI made a huge breakout in October, but after pulling into something of a reverse head and shoulders, with an ascending wedge in the right shoulder. The pattern started to break down last week, and today the selling really kicked in as the stock dropped through the support of its 50 day MVA (22.18) on increased volume (339,100; average 406,500). Quite a drop but not much volume, so we could see a relief bounce and an attempt to test the 50 day. Once the climb fails, however, we are looking to ride the stock back down toa target at the 200 day MVA (17.42, near the December low).
BUY POINT: After a test of the 21.50-22 range that fails, a drop through 21 on increased volume.
POSITION: March $25 puts to buy (QIP OE).
SVM (Servicemaster--$13.95; +0.01; optionable): Business services. Earnings 1-29.
http://biz.yahoo.com/p/s/svm.html
STATUS: SVM continues in its nice lateral consolidation, tightening up a bit along its short-term MVA's (18 day at 13.84) as volume has settled back (up to 323,100 today; average 364,800). The consolidation is something of a handle to a lengthy cup (dating back to early 2000 with highs at 15, but within a much lengthier pattern from 1998 with highs at 25). In a solid December move SVM took out its July high (making an even smaller cup), with really good volume on that run. After the rest on this lateral move, we are looking for another strong breakout move. Good money flow. Target: 17.
BUY POINT: Breakout: 14.32 on volume of 500,000. Stop: 13.32 (7%).
POSITION: Stock and/or April $12.50 calls to buy (SVM DV).
PRE-ANNOUNCEMENT PLAYS FOR THIS WEEK: Looking at PMI, TGIC, DHR and RYL this week.
BEST PLAYS:
MARKET FAVORITES BEST PLAYS:
1) MCHP - Gave up support
2) VRTS - Looking to breakdown
3) FLEX - Another one looking to drop some more
MCHP (Microchip Technology--$36.40; -2.00; optionable): Semiconductor.
http://biz.yahoo.com/p/d/mchp.html
STATUS: Not a good sign to make weak moves going into earnings, and after failing to hold over its December high earlier this month, MCHP fell back to its 50 day MVA (38.04). Today it dropped back through that support on increased volume (2.48 million; average 2.18 million), and after hours MCHP came out with its earnings report and was drifting higher. We will see how it plays out; MCHP closed just before its late-December low today, and although it could bounce a bit with the market back up toward the 50 day MVA before falling again. We will be ready to play it to the downside from there as well. Target: The 200 day MVA (32) initially.
BUY POINT: From here: A drop through 36 on continued strong volume; if we get a gap through that level, we will watch for a test back and then pick it up on the drop. Test: After a relief bounce with the market and test of the 50 day, a drop back through 36.30 on continued strong volume.
POSITION: March $45 puts to buy (QMT OI).
VRTS (Veritas--$42.00; -1.08; optionable): Software
http://biz.yahoo.com/p/v/vrts.html
STATUS: Dropped back again to the 50 day MVA (42.06) today, where VRTS found support last week. The bounce last week failed at the 10 day MVA (44.33; 200 day at 45.44), and it again tapped that level at the intraday high before pulling back. On the positive news from MERQ (which jumped after hours), VRTS could again try to test up to the 10 day, but we expect the move to lose steam with the market and turn back over. We are looking for the stock to give up the 50 day, and on a strong breach of that support we will look at puts.
BUY POINT: A move below the 50 day on volume of 15 million (average 12.7 million; today 15.2 million).
POSITION: March $50 puts to buy (VIV OJ).
FLEX (Flextronics--$21.79; -1.29; optionable): Printed circuit boards
http://biz.yahoo.com/p/f/flex.html
STATUS: Pushed up from a low of 22 in December, but that move fell way short of its December high, and the stock has come back down to take out its 200 day MVA (23.51) and today dropped to close below the December low. Volume was up but not real strong on the selling (8.83 million; average 10.7 million), and with some morning strength we will look for FLEX to try and test up toward its 200 day. That is a lot of resistance to overcome now, and if the market cannot sustain a move we are looking for FLEX to make a drop. Targeting 18 (late October low).
BUY POINT: After a test up toward 23, a drop back through 22 on above average volume.
POSITION: March $27.50 puts to buy (QFL OV - low open interest).
PRE-ANNOUNCEMENT BEST PLAYS
1) DRI - Broke out!
2) YUM - Held up well in the handle
3) TGH - Looking good on the test
4) TGIC - Forecast for Wednesday
5) PMI - Also forecast for Wednesday
6) BRL - Trying to break out of that consolidation
7) STU - Still in the pennant
8) LSTR - Needs to test the move
9) GTK - Ditto
10) RYL - Forecast for Thursday
DRI (Darden Restaurants--$38.77; +0.74; optionable): We are working on a date.
http://biz.yahoo.com/p/d/dri.html
BACKGROUND: Based upon our research it does not appear that DRI has ever split its stock. The annual shareholder meeting was on 9-20-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Broke out today on good volume (1.26 million; average 673,000), moving out its lateral consolidation after making solid moves in preceding sessions. Showing some resiliency and continued strength, DRI has made impressive moves up since its December breakout from a cup with handle, making surges and then forming nice lateral consolidations. Remember that 15% is a good move in this tough market, so our target remains 43 on this move. Also, the stock is above its upper channel trendline, so we are always cautious in that circumstance, although DRI has shown the strength that indicates it could continue the move.
BUY POINT: A buy up to 40.30 with continued strong volume. Stop: 36.05-37.48.
POSITION: Stock and/or April $35 calls to buy (DRI DG).
YUM (Tricon Global--$52.53; -0.64; optionable): Forecast to announce a split on 2-6-02 after the market closes in conjunction with earnings.
http://biz.yahoo.com/p/y/yum.html
BACKGROUND: Based upon our research it does not appear that YUM has ever split its stock. The annual shareholder meeting was on 5-17-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: YUM broke back over its June highs in October, and since has formed a double bottom with a couple of bounces along the 50 day MVA (currently 50.48). As it reached the midpoint of the pattern it has formed a handle, dipping back along the 10 day MVA (52.60), today closing just below that level after having dipped to an intraday low of 51.70. A decent recovery, as the stock moved on increased volume of 829,700 (average 842,300). Holding up in the pattern, and still a bullish play going into the forecast if it can hold up and produce a breakout. The stock is in a very large base dating back to early 1999 with highs at 70. Target: 62.
BUY POINT: 54.67 on volume of 1.3 million. Stop: 50.84.
POSITION: Stock and/or April $50 calls to buy (YUM DJ).
TGH (Trigon Healthcare--$71.42; +0.01; optionable): Forecast to announce a split on 2-8-02 before the market opens in conjunction with earnings.
http://biz.yahoo.com/p/t/tgh.html
BACKGROUND: Based upon our research it does not appear that TGH has ever split its stock. The annual shareholder meeting was on 4-25-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Broke out of a saucer with handle recently, which pattern was within a larger pattern going back to late 2000 (highs at 80). On the breakout TGH hit a high of 72.70 before testing back last Thursday, and since then it has held over the support of its 1 day MVA (70.89) and the former pattern highs at 70. Today it tested the 10 day but closed over it with a doji, with volume dipping back to below average levels (146,700; average 188,500). We will see if TGH can show strength off of this test and make a move. Target: The highs at 80.
BUY POINT: 72.82 on volume of 230,000 or better. Stop: 67.07.
POSITION: Stock and/or April $70 calls to buy (TGH DN - under 100 open interest).
TGIC (Triad Guaranty--$38.32; -0.63; no options): Surety & Title Insurance. Forecast to announce a split on 1-23-02 before the market opens in conjunction with earnings.
http://biz.yahoo.com/p/t/tgic.html
BACKGROUND: Last announced a 2:1 split on 9-18-97 at a stock price of $28. The annual shareholder meeting was on 5-10-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Got the dip back in the handle going toward the forecast. We were looking for that move after its bounced up last week from its 10 day MVA (38.35), showing topping signs of a doji and a gap up and reversal to end last week. The drop back today was not bad action in a handle, coming on volume that dropped way back to 7800 (average 41,500). The handle is off of a cup formed since August, when it hit up against 40 three times before pulling back from its strong 2000-2001 run. The overall pattern looks good (we like the nice run up going into the cup with handle - we like at least 30%, and the move was a bit more than that), and the low volume on the dip in the handle. Target on a breakout: 47.
BUY POINT: Breakout: 40.26 on volume of 62,000. Stop: 37.44 (7%). Aggressive: With an announcement, a move over 39 on above average volume. Stop: 37.
POSITION: Stock.
PMI (Pmi Group--$69.24; +0.14; optionable): Surety & Title Insurance. Forecast to announce a split on 1-23-01 before the market opens in conjunction with earnings. Right in split range.
http://biz.yahoo.com/p/p/pmi.html
BACKGROUND: Based upon our research it does not appear that PMI has ever split its stock. The annual shareholder meeting was on 5-17-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Like TGIC, another insurer in a good pattern forecast to announce a split before the open tomorrow. PMI has formed a cup with handle since June off another cup pattern that failed at the high of 74.94. A good pattern, although price/volume action over the course of the pattern could be better, and the handle is showing some erratic behavior. Rather than the nice, gradual pullback on lower volume we like in a handle, it has made some wide intraday swings, attempting breakout twice recently but failing as volume was not the greatest. Today it tested back below its 10 day MVA (68.38), but managed to recover for a loose doji. On an announcement we will look for a breakout, but as with all breakout in this market, ready to take profits when the move stalls. Target: 80, watching resistance at the high.
BUY POINT: Breakout: 70.20 on volume of 460,000 (up to 266,400 today; average 307,300). Stop: 65.29 (7%).
POSITION: Stock and/or March $65 calls to buy (PMI CM - under 100 open interest).
BRL (Barr Labs--$79.64; +1.64; optionable): Researching a split date.
http://biz.yahoo.com/p/b/brl.html
BACKGROUND: Last announced a 3:2 split on 5-31-00 with a board meeting. The stock price was $52. The annual shareholder meeting was on 10-25-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Has been moving in a consolidation over its 50 day MVA (65.86) for over two weeks now. BRL made triple tops at 90 from July-October before hitting down to 60 in November, but after a solid run back formed the present consolidation pattern. It finally made a bit of a move up it could hold today, but volume continued to be below average, as it has been through the last five weeks (up to 537,000 today; average 1 million). If we see some more volume kick in we can look at BRL on a move over its December high at 81.10. Target: 90.
BUY POINT: Over 81.10 on volume of 1.3 million. Stop: 75.42. Aggressive: Over 80 on volume of 1 million or better.
POSITION: Stock and/or May $75 calls to buy (BRL EO - no open interest for March).
STU (Student Loan--$82.08; -0.52; no options): Researching a date, as due for a split.
http://biz.yahoo.com/p/s/stu.html
BACKGROUND: Based upon our research it does not appear that STU has ever split its stock. The annual shareholder meeting was on 5-16-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Broke out in a big way in late December (over its April and August tops at 80), and since has meandered into a pennant pattern over the support of its 18 day MVA (81.42). Friday it tried to break out of that pattern, launching up to a new high at 84.40 intraday before peeling back into the pattern; today it tried again but pulled back again, this time from 83.50 as volume eased to 12,700 (average 13,600). We will look for the stock to continue to hold over its 18 day and make another run with some more significant volume. On a break over the high, targeting 90.
BUY POINT: Aggressive: Over 83.50 on volume of 20,000 or better. Stop: 79. Over December breakout high: 83.80 on volume of 20,000 or better. Stop: 79.
POSITION: Stock.
LSTR (Landstar System--$79.38; -0.09; optionable): Researching a date.
http://biz.yahoo.com/p/l/lstr.html
BACKGROUND: Based upon our research it does not appear that LSTR has ever split its stock. The annual shareholder meeting was on 5-16-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Formed a reverse head and shoulders since July, with the right shoulder forming an ascending wedge. It broke out of that wedge earlier this month, and after testing the breakout (76) LSTR has made a solid move back up the end of last week. Today it continued up, but after hitting 81.39 it pulled back (prior pattern high from July at 81.14), closing with a loose 'tombstone' doji on volume that remained strong although it dropped significantly to 92,200 (average 47,900). The pattern indicates a drop back, so although it hit the buy point we would expect the stock to test back to its prior high (78.52, or its August highs at 78) before continuing back up. Target: 90.
BUY POINT: After a test that holds 78, a move back over 80 on continued strong volume. Stop: 75.
POSITION: Stock only.
GTK (Gtech Holdings--$45.49; +0.26; optionable): Looking good again after earnings and back on the report. Working on a date.
http://biz.yahoo.com/p/g/gtk.html
BACKGROUND: Based upon our research it does not appear that GTK has ever split its stock. The annual shareholder meeting was on 7-9-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Since breaking out from a cup with handle in November, GTK has pulled into a pennant pattern. It made a solid move up in the pattern last week after having, for the third time in the pennant, tested below its 50 day MVA (43.42). Friday it had strong volume behind a run up, but again is having trouble at 46, gapping up but closing with a doji. Not the worst action considering the action in the Nasdaq, but off of this gapping pattern it could again test lower before trying to move again. If the market shows continued weakness, GTK will have a lot of trouble moving beyond resistance. Target: 52.
BUY POINT: 46.12 on volume of 500,000 (average 432,000; today down to 223,500). Stop: 43.
POSITION: Stock and/or March $40 calls to buy (GTK CH - low open interest, plenty at $45).
RYL (Ryland Group--$69.50; +0.36): Forecast to announce a split on 1-24-02 before the open in conjunction with earnings.
http://biz.yahoo.com/p/r/ryl.html
BACKGROUND: Based upon our research it does not appear that RYL has ever split its stock. The annual shareholder meeting was on 4-25-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: After a good run over three months, hitting a high of 75.85 in December before testing back to its 50 day MVA (currently 65.86). It has made a bounce, having trouble making it back over its short-term MVA's (69.56), but today gapped over those levels and hit up to 71.40 before pulling back. With earnings and the forecast Thursday, we will see how RYL responds; we know that there has been some punishment administered even on good news. We will see if it can hold support here Wednesday, perhaps setting up for something of a bounce. Targeting the recent high initially on a bounce.
BUY POINT: Holding the 69.50 level, a move over 71.40 on above average volume (357,000; today down to 264,500). Stop: 66.51.
POSITION: Stock and/or April $65 calls to buy (RYL DM).
PRE-SPLITS BEST PLAYS: Remember, we try to grab these as they break out of good patterns or as they start a run right before the split. Not looking for home runs, but looking for those $3 to $4 moves running into the split, watching for topping signs and potential resistance. Not huge money, but it can be very steady. We set our initial stops at the 7-8% range below the purchase price (or just below obvious support), and move them up on a move to preserve our profits.
1) HOTT - Doing well
2) SYMC - Could test back a bit first
3) FRED - Good moves but we need to be ready for a test
HOTT (Hot Topic--$34.35; -0.11; optionable): Apparel. Splits 3:2 effective February 6.
http://biz.yahoo.com/p/h/hott.html
STATUS: HOTT continues to edge up along its 10 day MVA (33.82; 18 day at 33.23), today testing back to the 10 day but holding and pulling up to close. The stock was looking like it was forming a handle to its double bottom (within the larger cup dating back to May, with a high of 38.20), but the recent upward drift is not the type of action we like in a handle. Volume has been low (up to 392,900; average 844,600), and it is encountering resistance at recent highs from its left-side pattern high at 34.93. We will see if it sets up better with a test back to the 10 day or if it makes a run from here. Target: 40 (watching resistance at the all-time high at 38.20).
BUY POINT: Breakout: From here or after a test of the 10 day, 34.82 on volume of 1.3 million. Stop: 32.38.
POSITION: Stock and/or February or March $30 calls to buy (UHO CH).
End Part 2 of 3
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