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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:

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 KSWS! Strong volume move out of the 5-month base. Will look for a move up to a target at 43 and taking profits there, or when the stock shows signs of topping out and not hanging around for a pullback. It's that kind of market.

Stocks/Indexes from the Saturday report:
ACTU: Broke loose of the recent consolidation but did not have a lot of oomph with volume dropping back down. The stock showed a doji that is still below the October highs noted on the weekend report. Can hold here or pull back further (to 6.46).
BBX: Not 10 and not the 10 day MVA could hold this one as higher volume and a move down showed the selling. Headed for the 18 day MVA at 8.79 on an abrupt drop in the handle (to the cup base). Not quite the move we wanted, preferring a more gradual pullback.
UNTD: Dropped back to the 18 day MVA on even lower volume; that is the support from which we expect UNTD to bounce.
RBK: Looked super Friday and popped higher Tuesday on a gap up. Showed a doji, however, on the much higher volume, and can be a topping sign. May get a hold at the 27 range on a pullback.
CBR: After the Friday doji at support (on lower volume), CBR unfortunately bled below the 18 day MVA with volume slipping even lower. It tapped 10, potential support from some late December/early January prices. Consolidating in a test after a cup with handle breakout. Closed just below an up trendline connecting Nov/Dec lows (coincides with the 18 day MVA).
QQQ: Broke down, clearing all December prices on the selling. Riding positions taken on the buy point at 38. If the index hits 37 it may try to bounce if the Nasdaq does the same, but will continue to look for a move down to our target at 35. Other potential support at 36.

Continued Plays:
ARBA: Sold hard and down to the 50 day MVA Tuesday. A heavy drop.
NETP: Were looking for a test of the 18 day MVA at the most, but the stock slid below that support Tuesday. Volume was lower and got a bounce off of 1.85, but not what we wanted to see. Testing the breakout from a cup with handle that started on a bounce from the 18 day MVA.
SEBL: Earnings are out after the bell Wednesday. Tuesday selling back to the 18 day MVA after opening at the 35 level resistance. That's been tough for this stock for almost 2 weeks. Stronger volume on the move down; the 200 day MVA is below at 31.53. Drifting higher after hours on MERQ earnings. May get a pop tomorrow on those.
TER (put): Gapped higher but then slid back down to post a new closing low for the month. Looking for a move down to 23. Hit our lower buy point (below 28.40) Thursday.
TYC (put): Hit our target at 41 on Friday then bounced back up over 46 intraday. Today TYC opened just below resistance, the 200 day MVA at 51.72) in a huge gap up, but sold back down to 47.55. News was of a restructuring into 4 publicly traded companies. A wild move in the stock, but investors were not totally impressed. For any existing positions we are going to see if it will back down a bit more toward 44.

Best Plays:
1) TECD: Nice ascending wedge.
2) BRCD: Broke both the 50 day and 200 day MVAs on strong volume. Looking for more downside.
3) DJX: Continuing weakness and on verge of breaking down.

New:

INOV (Innoveda--$2.44; -0.03; optionable): Technical & System Software
http://biz.yahoo.com/p/i/inov.html
STATUS: Newly issued early 2000. The stock sank into a base since then, and after hitting lows near $0.50 trended up well since October of last year, finally breaking back over the 200 day MVA in a strong move 8 days ago on an upgrade. Volume was huge on the gap over the resistance, and while that was the end of the breakout move, we really like the orderly pullback as INOV regroups. Price is gradually drifting lower, and hit support of the 10 day MVA Tuesday, the falling volume suddenly blasting back over average (348,800; avg. 152,000). We are looking for a strong bounce from here after this test of the breakout. Breakout high was 2.79. Huge money flow. Target: 4
BUY POINT: On a bounce from the 10 day MVA: 2.50 on continued rising volume. Stop: 2.33 (7%)
POSITION: Stock.

TECD (Tech Data--$46.63; +0.66; optionable): Computers Wholesale
http://biz.yahoo.com/p/t/tecd.html
STATUS: In an ascending wedge formed since early November at the upper right side of a 17-month cup base. Volume has been falling overall throughout the pattern, though rising the last 2 days as the stock holds the 18 day MVA (45.70). On a move up from that support Tuesday, volume was rising to 839,100 (avg. 856,000), and with the pattern tightening up, TECD can be getting ready for a breakout. It is showing strong money flow and high relative strength, and on the strong move out of the pattern we are pegging a target at 56.
BUY POINT: Breakout: 48.38 on volume of 1.2 million or higher. Stop: 45 (7%)
POSITION: Stock and/or March $40 calls to buy (TDQ CH).

http://www.investmenthouse.com/cd/tecd.html

Puts:

BRCD (Brocade--$31.76; -3.60; optionable): Computer Periperals
http://biz.yahoo.com/p/b/brcd.html
STATUS: Broke the 50 and 200 day MVAs today on stronger volume that was nearly up to average level (15.2 million; avg. 16.4 million). The stock had opened at the 18 day MVA (35.91) then sold down from there. After hours it was drifting higher. We will look for it to try and move back to or over the broken support (test of the breach or the 200 day at 32.21), and on a move back down from there (the "kiss good-bye"), we will look at playing some puts down to an initial target at 25. There is potential support at 30.
BUY POINT: Aggressive: 32 on above average and rising volume. Below support: 29 on continued strong volume (17 million or higher).
POSITION: March $40 puts to buy (UBF OH).

http://www.investmenthouse.com/cd/brcd.html

Index:

DJX (1/100 Dj Indu--$97.14; -0.58; optionable):
STATUS: Looking for a breakdown for this index as well, for a move down to a new target at the 92.50 range for a hefty retracement of the gains since the September lows (near 82.50). The index is holding above the previous January low at 97.11 but tapped below that (96.97) on Tuesday's low. Volume has slid back since the index broke through the 50 day MVA over a week ago, but is still high relatively. Still, if volume continues to fall, after the recent selling in the markets the DJX may try to bounce back up to the 50 day MVA (from here) before breaking the support. That is the kind of action we expect to see as the index trends lower. Holding current positions, but looking to add to positions and for new entry points on a move below 97 at the December lows. We will also look at positions on a failed test of the 50 day MVA. Volume 1.3 million (avg. 1.2 million).
BUY POINT: 97 on preferably rising volume for the move down.
POSITION: March $98 puts to buy (DJV OT).

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, KRON, MIK, BMET, APPB, MYL, IGT

FRX (Forest Labs--$82.57; +2.62; optionable): Drug Manufacturers
http://biz.yahoo.com/p/f/frx.html
STATUS: Made a nice move off of the 18 day MVA (79.80) though volume was lower at 1.4 million (avg. 1.2 million) on this incipient breakout move. FRX looked good but we will want to see a surge back up in volume; it was above the average despite falling back. FRX has been in a cup with handle and struggling in the handle since the first of the year, but recently had tried tightening up above the support (4 dojis). It closed over the December closing high (82.46), a price hit twice consecutively at the time; the December high is at 83.19. Target is at 95 (initial) for a 15% gain; on a move to that level we will be ready to take profits. We can also selling covered calls on any purchases of stock or long-term holdings upon topping out, if we get a upside good move first. Relative strength is breaking out.
BUY POINT: 82.59 on volume of 1.8 million or higher. Stop: 76.81 (7%)
POSITION: Stock and/or May $75 calls to buy (FRX EO)

http://www.investmenthouse.com/cd/frx.html

ACS: Closed just under the upper channel line (resistance) after hitting the 50 day MVA on the low; volume was strong on the selling. This is the start of a stronger move; once they break above that upper channel they are at risk. For remaining positions or those w/calls sold on them, we will be watching the 50 day MVA to hold; if not, we will close out the rest.
MYL: Looks ready to make a move off the 50 day MVA; still has resistance just below 38 on a move up.
LLL: After a nice 2-day move off the 10 day MVA, pulled back on lower volume. Not bad action; look for a hold here or at the 10 day.
IGT: Still moving laterally above support. Buy point on weekend report.
KRON: Earnings are out tomorrow (1-23) at an unspecified time. Remember, KRON gave an upside prognosis back in early December.

UP & COMERS PORTFOLIOS: BBBY, SRCL, EBAY, KG.

EBAY: Closed at 60 Friday and moved down to our target at the 200 day MVA (58). Continued selling on rising volume and may break, but if it bounces we can close out the position.
BBBY: Headed for the 200 day MVA on rising volume. It has traded below the 50 day MVA for 3 of the last 4 days, so time to close positions. No reason to wait for a bounce from the 200 day MVA as it will likely take some time (not forever) for the stock to make a recovery. May try a weak bounce, and we will use that to exit.

MEMBER PORTFOLIO: BRCM, AMAT, JNJ, MSFT, AOL, BUD. Removing AOL. Thought it might make a recovery back over the 50 day MVA, but continues to look weaker and weaker.

BRCM: Announcing earnings tomorrow after the bell. The stock broke the 50 day MVA on strong volume today; in a market bounce it may try to test that breach. What a hammering. Not taking any downside positions on it yet, though, with earnings coming out and it being so volatile.
MSFT: The stock broke its 200 day MVA on continued strong volume (though lower, still well above average). Volume was strong but lower; may get a quick move back up to test the broken support. If so, that is the exit point, which saves a sell at the bottom before the bounce back up.
AMAT: Another move down after breaking the 50 day Thursday. May try to test the 50 day MVA if it holds and bounces back up. Like MSFT, the bounce back up gives a better exit point.
BUD: Still holding up in the wedge.

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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