us stock market, trend trading stock

Begin Part 2 of 2

Support and Resistance

Nasdaq: Closed at 1922.38.
Resistance: The 200 and 50 day MVA (1943.01 and 1940.69, respectively) are directly ahead, and roughly coincide with the tops of the November consolidation (1934 to 1941). The March 2000 down trendline at 1942. Then 2000. After that, the December intraday high at 2065.69, followed by the January intraday high at 2098.88.
Support: The bottom of the November consolidation (1875) held. After that point, 1800 at best. As noted 1750 would be a 50% retracement. Support at that level looks to be anywhere from 1700 to 1750.

S&P 500: Closed at 1128.18.
Resistance: Trying to clear the March 2000 down trendline (1122) and the 1125 consolidation range; has not broken away yet. The 50 day MVA (1137.88) to 1150 are more formidable. After that the 200 day MVA looms at 1166.33. The December high (1173.62) and January high (1176.55) all line up as strong resistance.
Support: 1125 more or less held; the index has not really decided if it is going to break away just yet. After that is 1100, the tops of the November consolidation range. That is followed by a range of support from 1075 to 1050, the 1050 level holding twice in October. That is right at the 50% retracement.

Dow: Closed at 9730.96.
Resistance: Still the 50 day MVA (9879.80) has checked upward movement thus far. Then 9992 to 10,000. After that the 200 day MVA (10,103.87).
Support: 9750 to 9690 has held firm thus far. From here it gets dicey all the way down to 9500, a level of good support. After 9500 there is a very congested trading range from 9125 to 9500. A 50% retracement is 9181.

Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.

1-22-02
Leading Indicators, December (10:00): +1.2% actual versus 0.7% expected and +0.8% prior (revsed from 0.5%).
Treasury Budget, December (14:00): $26.6B actual versus $24.0B expected and $32.7B prior.

1-24-02
Initial Claims, 1/19 (8:30): 400K versus 384K prior.

1-25-02
Existing Home Sales, December (10:00): 5.16M versus 5.21M prior.

TEAM TRADES

Today was a mixed day, downside looked good early, and then a rally in tech, and pullback on the Dow late. It had something for everyone, and we took part in many different moves.

NTIQ was on the SSR as a put. It had the typical action of late: a rally, twin tops, a breakdown below the 50 day MVA, then a weak test. We were looking for the fall back down. That did not take long today. The stock did just what we wanted: it started the day higher, ran up to test resistance once again, and then turned lower. It broke below our entry point after about 15 minutes, but we held off issuing an alert to the SSR subscribers until it moves laterally for 10 minutes and then started to fall. That was the move we wanted and the cue to enter the put positions. This is one of our favorite put plays: the break of support, the rally back up to test it, and then the fall from there. This one worked out well today; most of the action was over after the first hour, but the stock was not able to make a strong move higher even as the market rallied later, that is a good sign that when the market weakens again, it will resume its fall.

DSTM: We had entered this smaller priced stock early in the month, watched it run to 8 and then pullback to 7. Still in the black, but not the move we wanted so fast. Also, we had seen some down sessions on above average volume. We decided to put a target in at $8, giving a 20% upside move from the first buy point. We decided that was a good point to take some money off the table; the move was back to 8, it ran over that level and started to pullback, and volume was not huge. In this market we decided to take some money off the table.

DJX: We were looking at add some more DJX puts when it tripped below the December low. It did that about a half hour into the session after an attempted move higher. We entered some more positions when it did that. We knew it could bounce higher, but we liked the fact it has rallied earlier and then pulled back. As it turned out the index rallied, pulled back to test 97, and then rallied sharply after lunch. It capped out with a double top and started to sell. That had us feeling better, and the index dropped close to the entry point before a little bump at the close. Overall we are please, but of course we always like to see our put positions just tank. UP and down, up and down, but right now the trend is still down.

PLAYS TO LOOK AT: ACS announced a split today, rewarding shareholders who were already handsomely rewarded on the stock's long upward climb over the past 18 months. A truly great run going into the announcement, although it is paying the price now as earnings are being punished.

BONUS PLAYS:

SBUX (Starbucks--$22.64; +1.26; optionable): Eateries.
http://biz.yahoo.com/p/s/sbux.html
STATUS: A stock that we have had a lot of success with in the past on the report comes back again. SBUX broke out in a big way from a reverse head and shoulders to start the year, gapping up and then forming a handle consolidation to a larger cup pattern dating back to June. After testing back to the 18 day MVA (21.30) in the handle, SBUX blasted up going into Thursday afternoon's earnings. Volume was up and solid at 5.32 million (average 4 million), which could be a good sign as to expectations. Looking for a breakout from here, with the handle high ahead at 22.97. Target: 26.
BUY POINT: 23.09 on volume of 6 million. Stop: 21.47 (7%).
POSITION: Stock and/or April $20 calls to buy (SUX DD).

WEBM (Webmethods--$21.77; +1.57; optionable): Software.
http://biz.yahoo.com/p/w/webm.html
STATUS: Made a strong breakout to start January, and now has pulled into another handle to its cup which has formed deep in its base. Today WEBM tested all the way down to 18.98 (below handle lows and the 18 day MVA, at 20.22), but surged back up with a strong move up to close. Volume was up and strong (2.06 million; average 1.28 million) as the stock ran into its earnings announcement, which appeared to be strong; of course, we will see the reaction in the morning. We are looking for a breakout, with the high in the handle at 23.18. Target: 26.
BUY POINT: 23.30 on minimum volume of 1.9 million. Stop: 21.67 (7%).
POSITION: Stock and/or April $20 calls to buy (UUW DD).

MARKET FAVORITES:

QLGC (Qlogic--$51.02; +2.86; optionable): Semiconductor.
http://biz.yahoo.com/p/q/qlgc.html
STATUS: Pushed up going into earnings but might not be able to hold. After hours QLGC was trading back below the 50 day MVA (48.60), and on a gap down we will see if it can make it back over that level, but we could get a test and then a drop back, especially if the Nasdaq turns back over. On a put we would target the 200 day MVA, currently at 42.77.
BUY POINT: If we get a gap down, a move down after a failed attempt at the 50 day MVA, looking for continued strong selling volume (13.4 million; average 12 million).
POSITION: March $55 or $60 puts to buy (QLC OK or QLC OL).

NEW PRE-SPLIT PLAY:

BLL (Ball Corp--$69.32; +2.18; optionable): Packaging & containers. Announced a 2:1 stock split today, effective February 22!
http://biz.yahoo.com/p/b/bll.html
STATUS: After a super run in 2001 that took BLL from 40 to a high earlier this month of 74, BLL pulled back and gave up its 50 day MVA (67.21), but held just under it. That failure to move back over can sometimes point to a drop, but with a stock split announcement today BLL gapped back over the 50 day and its 18 day MVA (68.26), and continued up from there with a move on very strong volume (504,600; average 248,500). A solid move, and the stock closed just under some resistance from its November high and late-December consolidation range in the 70 range. We will see if the strong move can continue, and take the stock back to its high and beyond.
PLAY: A move over 70 on continued strong volume, with stock and/or May $65 calls to buy (BLL EM - low open interest for the March expiration). Stop: 65.21 (7%).

PRE-ANNOUNCEMENTS: No announcements from TGIC or PMI, but they are still solid in their handles. DRI's run is showing weakness early, although TGH, LSTR, WLP and EXPD are showing some good action.

YUM ($53.74; +1.21): Forecast to announce a split on 2-6-02 after the market closes in conjunction with earnings. Strong move up today in the handle to the double bottom. YUM reached close to the buy point (intraday high of 54.39), as volume increased to 902,600 (average 813,000). The breakout is a move to 54.67 on volume of 1.3 million, with stock and/or April $50 calls to buy (YUM DJ).

STU ($83.80; +1.72): Researching a date. After a failed attempt to hold a move up in its pennant last week, STU made a stronger move today. It opened to gap down to the 18 day MVA at 81.60, but sprang back up over the buy point on excellent volume (42,600; average 11,600). The move we were looking for, and a continued buy on a move over last week's intraday spike (84.40) on continued strong volume. Stock only.

GTK ($47.37; +1.88): Good earnings last week and a solid move up from its 50 day MVA at 43.50. After a doji just below recent resistance in the pennant at 46 yesterday, GTK was a bit iffy, but today it gapped over that level, tested it, and then moved back up to close just below the all-time high (47.50, from December). When we get a gap over the buy point we often see a test, and we like to wait for that move and catch the stock on a strong push back up. Looking for a new high from here, with the next buy point at 47.52 on continued strong volume (up to 746,400 today; average 426,000). Stock and/or March $45 calls to buy (GTK CI).

PII ($54.99; -0.01): Forecast to announce a split on 1-29-02 before the market opens in conjunction with earnings. Consolidating over its 50 day MVA (54.41) as we go toward the forecast, and today showed a tight doji as volume spiked way up to 152,400 (average 110,400). Could signal a bounce, and on a move over the short-term MVA's (18 day at 56.21) with continued strong volume, stock and/or March $50 calls to buy (PII CJ). Stop: 53.

RYL ($69.80; +0.30): Forecast to announce a split Thursday before the open in conjunction with earnings. RYL tested its 50 day MVA (66) last week and has just climbed back over its short-term MVA's (69.60) going into the forecast. It dipped way back intraday, but held over the 50 day at its low and recovered with strong volume behind it (438,800; average 352,000). With the strong volume on the recovery, it could be ready to move, but we will see if we get an announcement with earnings. On a move voer 71 on continued strong volume, stock and/or April $65 calls to buy (RYL DM). Remember, if we see a gap up, we like to see if it will test back before moving up.

DHR ($59.60; -0.15): Forecast to announce a split on Thursday before the open with earnings; however, the company has declared a quarterly dividend which could make a split announcement less likely. Just holding onto the 50 day (59.73) today to close with a doji. Not great action, but with an announcement we could see a solid move, with the aggressive play on a move over 61 on volume of 1.5 million, with stock and/or March $55 calls to buy (DHR CK).

PRE-SPLITS: FRED has made a nice move, and although it is showing resiliency, the chart indicates a pullback.

HOTT ($33.90; -0.45): Splits 3:2 effective February 6. Pulled back to the 10 day MVA, and although on bigger volume, pretty light at 621,100 (average 818,800). We were looking for a pullback into more of a handle, and if it can hold we are looking at a breakout with a buy point of 34.82 on volume of 1.3 million, with stock and/or February or March $30 calls to buy (UHO CH).

SYMC ($74.19; -1.85): Splits 2:1 effective February 1. Has tested back, today dipping toward its 10 day MVA (72.64), near its recent closing high before last week's huge move. Not back action on a test, and we are looking for the stock to hold here and mount a move back up. On a move over 75.50, stock and/or April $70 calls to buy (SYQ BN). Stop: 71.

CONTINUING CANDIDATES:

ETH ($38.25; -0.87): After a strong drop through the 50 day (38.92), ETH has tested that former support but fell back again today on huge volume (569,700; average 211,100). The big volume sets the stage for a drop through 38 on continued strong volume, which would trigger a put play down to an initial target of 38. February $45 puts to buy (ETH NI - ready to exit upon reaching the target with this near-term expiration; no open interest for March).

GNSS ($58.68; +0.98): GNSS fell very hard Tuesday, taking out its 50 day MVA (60.56), and continued plummeting today, but caught itself at 52.80 and recovered on continued strong volume (7.7 million; average 2.67 million). The bounce is common after such a strong drop, and we expect this test of the 50 day to fail, and for GNSS to fall back. On a drop through 57 on continued strong volume, March $70 puts to buy (QFE ON).

POST-SPLITS: CACI enjoyed a nice rebound and has some upward momentum.

Good Investing!
Jon L. Johnson and the Stock Split Report 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.

us stock market
trend trading stock