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Begin Part 2 of 2
Support and Resistance
Nasdaq: Closed at 1942.58.
Resistance: The 50 day simple MVA (1960) held today on the high. It is still not totally clear of the exponential 50 day and the 200 day MVA (1940.76 and 1935.36, respectively) and the tops of the November consolidation (1934 to 1941). After that is 2000 and then the December intraday high at 2065.69, followed by the January intraday high at 2098.88.
Support: The bottom of the November consolidation (1875). 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 1132.15.
Resistance: The 50 day MVA (1137.65) held today, and there is resistance on up to 1150. After that the 200 day MVA is at 1166.46. The December high (1173.62) and January high (1176.55) all line up as strong resistance.
Support: 1125 is still holding. 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 9796.07.
Resistance: The 50 day MVA (9876.52) again checked the upside. Then 9992 to 10,000. After that the 200 day MVA (10,105.42).
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): 376K actual versus 400K expected.
1-25-02
Existing Home Sales, December (10:00): 5.16M versus 5.21M prior.
TEAM TRADES
Today we were looking both directions again.
BLL: On the Stock Split Report, a mix between a pre-split and 50 day MVA bounce. The idea here is to catch onto some momentum on the split announcement from this winner and ride it higher. It had moved up its 18 day MVA, making 5 bounces. It sold back and just undercut the 50 day MVA, and then stated to rally Wednesday on strong volume. We were ready to jump in today when it cleared a bit of resistance, and it was moving on good volume when it did. Now the idea on this play is to capture the momentum, but the stock has come off the 50 day MVA after a low volume pullback, and if it resumes its trend of bouncing up the 18 day MVA, we will let it work for us. On these type of plays, we see the move, get in, let it run and then take the money off the table.
BBX: This was a more 'standard' play on the Daily so to speak, a breakout of a cup with handle pattern in the savings and loan sector. Financials are holding up better than the rest of the market, a signal that the economy is actually improving. Anyway, BBX spent the first two hours moving more or less laterally at the 10.20 to 10.25 level. Volume was decent. Then some massive volume came in and the stock bolted toward the buy point at 10.32. It hit that on a run to 10.60. We were able to get an order in and a fill for some shares at the 10.49 ask; it was moving fast. Now we sit back and look for our move up to net 20% or better.
THE PLAYS:
Good movers: Continued breakout with a strong move from WCS. DKWD broke out of the ascending wedge finally, and volume was super. Above 5% for buying on breakouts, but a nice move! SAGI was down almost 2 points after failing to break resistance at the 50 day MVA. VRTS hit our upside target at 45 today; the stock closed at 46.40 on a gap up over the 18 day MVA, and volume was above average as well. Can head for resistance at the 50 range (January highs).
Previously covered and looking good:
PRSE: Made a good move up in the handle to its 6-month cup base, but volume fell back somewhat (still above average). Buy point is 26.78 on continued high volume.
LNOP: Tested back to the 50 day MVA (well below the buy point in the ascending wedge) but made a strong move off the 18 day MVA today and is heading for the January high at 8.75. Has made a big move in 2 days.
LTD: Breakout from the cup with handle. A buy to 17.61 on the move.
MONE: Broke out of the flying plateau-type pattern 2 weeks ago but the move pulled back to the 18 day MVA again; today the stock gave its most solid move since late December, breaking out over the January highs on strong volume. Earlier target of 17 moved up to 18 for taking profits ahead.
Notes on some stocks that are selling back:
THOR: Broke the 50 day MVA on rising volume (still below average). Tapped support at the 50 day MVA, simple.
LXK: 4th quarter profits fell and so did the stock, breaking support on heavy selling. Can be a short down to 45 (November lows).
Continued plays that look decent: See Wednesday report for more details.
MOGN: Up on stronger volume in the handle to its 13-week cup base. Buy point is 16.90.
ANAD (put): Still looking for the bounce down from the down trendline, where it opened today, selling back on slightly rising volume.
ORI: Hit the buy point (28.58) in the ascending wedge but pulled back below it to close. Volume strong.
New Upside:
Looking for a shorter term trade at this point:
VARI (Varian--$33.96; +2.21; optionable): Scientific & Technical Instruments
http://biz.yahoo.com/v/vari.html
STATUS: First quarter earnings were up 17% and the stock blasted off the 50 day MVA (29.95) on big volume as institutions stepped in and bought (445,500; avg. 207,000). VARI is in an 8-month cup with handle base within a larger base. Now we call it a handle, but the recent pullback to the 50 day MVA while on decreasing volume when price was above the 18 day MVA, increased on a break of the support and VARI started selling. That created a steeper handle than preferred. Thus, we are looking at this as a 50 day MVA bounce (the stock held the support), and will consider aggressive positions from here for a trade up to an initial target at 38, at the range of the highs at the cup's beginning (just after mid-May). Money flow and relative strength both ahead of price, and buying is strong.
BUY POINT: Aggressive: 34.05 on continued strong volume. Stop: 31.67 (7%)
POSITION: Stock and/or May $30 calls to buy (IUA EF).
http://www.investmenthouse.com/ct/vari.html
Continued new plays:
CTAS (Cintas--$50.14; +1.12; optionable): Diversified Services: Business Services
http://biz.yahoo.com/c/ctas.html
STATUS: CTAS is in a 6-month cup with handle base (of sorts), with the handle holding above the 18 day MVA and showing an ascending wedge action. Not a super handle, but we like ascending wedges as they can give good breakouts. In this market we are looking to take profits once we hit our target anyway, or, if a move looks ready to top out at some point before the target. For CTAS, the action was good Thursday on a solid move up from the 18 day MVA (47.31); volume 1.2 million above the average of 809,000. Look for a breakout over resistance at 50.62 (December high) on stronger volume. CTAS had some trouble with the 52.60 level at the start of the base (July highs), so will watch that level. Money flow at good levels, and we like that relative strength is breaking out ahead of price. Target: 61
BUY POINT: Breakout: 50.75 on volume of 1.1 million or higher. Stop: 47.20 (7%)
POSITION: Stock and/or May $45 calls to buy (NQQ EI).
http://www.investmenthouse.com/ct/ctas.html
New Puts:
JEC (Jacobs Engineering--$64.01; +1.23; optionable): Materials & Construction
http://biz.yahoo.com/j/jec.html
STATUS: Trying to move back up after selling down on a break below the 50 day and then the 200 day MVAs over the last few weeks. Currently JEC is back up, Wednesday moving above the 18 day MVA (63.59) to tap at a short term down trendline on the high of 64.25. Lower volume moves up (which this was, volume 145,200; avg. 247,000) are usually not sustainable, and if you throw in resistance it is a recipe for a move down. On a move back below the 18 day, look for another fall to the January low at 58.41, level to which JEC sold back on the break of the 200 day MVA. Potential support at 62.45, so look for strong volume on the way down.
BUY POINT: Aggressive: 62.40 on strong and rising volume.
POSITION: April $75 puts to buy (JEC PO).
http://www.investmenthouse.com/ct/jec.html
TNL (Technitrol--$25.24; -2.01; optionable): Diversifed Electronics
http://biz.yahoo.com/t/tnl.html
STATUS: Moved up Wednesday on lower volume, making it back over the 50 day MVA but just barely (the support level is at 27.14). However, the company filed for a secondary offering of stock, which had the effect of turning things around dramatically. Opening just below the 50 day, TNL sold heavily, breaking the 200 day MVA (25.55) on the move. Looking for a continued drop to a target at 21, the September low, on continued weakness. The stock may try to move back over the broken support (200 day) first. Volume strong at 276,900 (avg. 128,000).
BUY POINT: Aggressive: 24.95 on continued strong volume.
POSITION: March $30 puts to buy (TNL OF).
http://www.investmenthouse.com/ct/tnl.html
Continued: QCOM on the high today tapped resistance at 45 then moved down, holding above Wednesday's closing price. However, earnings were flat and the company warned for the 2nd quarter, and was down to 41.82 after hours (closed regular trading day at 43.71). Adjusting our target to 41.50.
AA (Alcoa--$35.22; +0.22; optionable): Metals
http://biz.yahoo.com/a/aa.html
STATUS: After selling back for 2 weeks and in the midst of it breaking the 50 day MVA (35.72), the stock turned back up from the 34 range, and is now back at the former support, now resistance. Volume was lower as AA opened just below then tapped the moving average on the intraday high, moving down but posting a small gain anyway(4.6 million; avg. 3.2 million) as it held the 18 day MVA (35.22). If AA cannot move over the 50 day MVA and continues lower on a move below the 18 day, we will look at taking aggressive positions ahead of our original buy point at 33 (the "kiss good-bye"). Target 28
BUY POINT: Aggressive: 34.90 on rising volume.
POSITION: April $40 puts to buy (AA PH)
http://www.investmenthouse.com/ct/aa.html
For a review of frequently asked questions, please use the link below:
http://www.investmenthouse.com/1questions.htm
Investment House subscribers are offered a special from eSignal for those interested in a realtime service. Contact:
Ray Fitzgerald
Account Executive
800-322-0940
Office hours 6:30-3:30 PST
rfitzgerald@esignal.com
Good Investing!
Jon L. Johnson and the Technical Traders Team
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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