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Begin Part 2 of 3

Support and Resistance

Nasdaq: Closed at 1937.70.
Resistance: The 50 day simple MVA (1963.97) is still acting as resistance. Before that, the index has still not broken free of the November consolidation range from 1934 to 1941. In addition the 50 day exponential MVA is at 1940.64; it has not broke that either. 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 1133.28.
Resistance: The 50 day MVA (1137.48) held once again on the close. Then there is resistance on up to 1150. After that the 200 day MVA is at 1166.61. 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 9840.08.
Resistance: The 50 day MVA (9875.09). Then 9992 to 10,000. After that the 200 day MVA (10,107.04).
Support: 9750 to 9690 continues to hold. 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.

1-28-02
New Home Sales, December (10:00): 923K versus 934K prior.

1-29-02
Durable Orders, December (8:30): 1.0% versus -4.8% prior.
Consumer Confidence, January (10:00): 95.0 versus 93.7 prior.
FOMC Meeting starts

1-30-02
GDP-Adv., Q4 (8:30): -1.1% versus -1.3% prior.
Chain Deflator-Adv., Q4 (8:30): 1.9% versus 2.3% prior.
FOMC Meeting (2:15).

1-31-02
Initial Claims, 1/26 (8:30): 376K versus 376K prior.
Employment Cost Index, Q4 (8:30): 1.0% versus 1.0% prior.
Personal Income, December (8:30): 0.2% versus -0.1% prior.
Personal Spending, December (8:30): -0.2% versus -0.7% prior.
Chicago PMI, January (10:00): 45.0 versus 41.5 prior.
Help-Wanted Index, December (10:00): 45 versus 45.
FOMC Minutes, 12/11

2-1-02
Nonfarm Payrolls, January (8:30): -60K versus -124K prior.
Unemployment Rate, January (8:30): 5.9% versus 5.8% prior.
Hourly Earnings, January (8:30): 0.2% versus 0.5% prior.
Average Workweek, January (8:30): 34.2 versus 34.2 prior.
Michigan Sentiment-Prel., January (9:45): 94.2 versus 94.2 prior.
Construction Spending, December (10:00): 0.2% versus 0.8% prior.
ISM Index, January (10:00): 49.5 versus 48.2 prior.

SUBSCRIBER QUESTIONS

Q: When you have a support level in mind for a stock, is this set in stone on executing a sell if it hits intraday or only if it closes at or beneath that level? Case in point: SYMC [Wednesday]. Hoping for a hold of 74 but it did fall below before recovering. I did not sell when hit intraday but had in mind to, if it closed below.

A: SYMC is a pre-split stock that has been on a nice run heading into its split this week, combining the momentum of a pre-split with a good 50 day MVA bounce for a $10 move. It showed some action Tuesday and Wednesday that often chases us out of pre-splits after they have made a good move: closed off of the intraday high Tuesday and then gapped a bit higher Wednesday and sold down below the Tuesday closing price. After a good pre-split move that often indicates more selling ahead and we will often take profits at that point.

More specific to your question, usually we look for the stop point we have set to hold on the close. Many times we see a stock test below the 50 day MVA or other support level (e.g., price consolidations) intraday and then recover and continue on up from there. What we usually look for is whether the stock closes below the support level we want to hold, and then cannot break back over that level on the close the next session.

We try to use support levels or resistance as buy points as much as possible. For example, when a stock breaks free and clear of resistance on strong volume, that is where we want to buy it. Then we can use that broken resistance as our support level. If we buy the stock within 5% of that support level (the former resistance), setting a 7% stop loss point allows the stock to test below the support level intraday and recover without having to worry about selling or not.

THE PLAYS: Breakouts by TGH, GTK and PMI, and LSTR, BLL and CHS continued their great moves!

BONUS PLAYS: Some solid action from bonus plays this week, with PQE and PECS setting off alerts Friday, WEBM breaking out Thursday, and SLVN, SVM and UNH still in good position.

NTBK (Net.Bank--$13.28; +0.26; optionable): Savings & Loan.
http://biz.yahoo.com/p/n/ntbk.html
STATUS: NTBK has made a strong move the last two months, breaking from a cup formed since May, which is part of a larger cup (with a double bottom configuration) dating back to September. NTBK is now back in the range of those September highs, having formed a handle over the last week. Volume has not settled down much, however, and Friday the stock started up again with volume spiking back up to 1.09 million (average 444,000). We will see if NTBK rests some more here in a handle, or if it can start another charge after this rest. Target: 16.
BUY POINT: 13.65 on continued strong volume (minimum 670,000). Stop: 12.69 (7%).
POSITION: Stock and/or April $12.50 calls to buy (NAA DV).

JPM (JP Morgan Chase--$34.99; -0.91; optionable): Business services.
http://biz.yahoo.com/p/j/jpm.html
STATUS: In a downtrend since early 2000, and things could get worse as JPM apparently had a hand in the Enron offshore partnerships. After moving up Thursday to tap at its long-term down trendline (with the 10 day MVA, 36.29), JPM gapped down Friday and continued to fall, taking out its December-January lows with high volume (13.9 million; average 7.89 million). Looking for continued strong downward momentum. Target: 32 initial with 30 primary.
BUY POINT: A drop through 34.50 on continued strong volume.
POSITION: March $40 puts to buy (JPM OH).

WEDC (White Electronic Designs--$7.39; +0.10; no options): Semiconductor. Earnings 2-5-02.
http://biz.yahoo.com/p/w/wedc.html
STATUS: WEDC has pulled into a tight handle consolidation off of something of a 10-week cup pattern, although the December spike in the middle gives it something of an ascending wedge configuration as its bounced along its 50 day MVA (6.56). WEDC has shown three consecutive dojis over the support of its 10 day MVA (7.24), getting a volume spike Thursday but settling back again Friday (44,500; average 98,500). The high in the pattern is an intraday spike at 8, but for positions we will look for a move over 7.60 (the closing high). Target: 9.50.
BUY POINT: 7.70 on volume of 147,000. Stop: 7.16 (7%).
POSITION: Stock

CVG (Convergys--$30.96; -0.84; optionable): Business services.
http://biz.yahoo.com/p/c/cvg.html
STATUS: Fell out of a cup with handle this month (highs at 38), and strong drops going into earnings are typically not a sign of good things to come. Going into Thursday's announcement the stock rebounded a bit toward the 200 day MVA (32.86), tapping that level on the news but dropping back from there. Friday the selling intensified, with volume shooting up to 3.48 million (average 699,000). Looking for continued weakness to push CVG down on a put play to an target of 25.
BUY POINT: On a drop through 30.25 on continued strong volume.
POSITION: March $35 puts to buy (CVG OG - no open interest).

PRE-ANNOUNCEMENT PLAYS FOR THIS WEEK: Looking at PII this Tuesday, with several coming up.

NEW PRE-ANNOUNCEMENT PLAYS:

RARE (Rare Hospitality--$26.10; +0.05; optionable): Restaurants. We are working on a date, but it moving right into range.
http://biz.yahoo.com/p/r/rare.html
STATUS: RARE is in an 8-month cup with handle base within a larger base of 11 months, highs in the latter at 32. After peaking at 27.50 recently, it is forming a handle as volume drops back. The stock threw a huge volume spike when it reached peak price in the handle, but volume sharply dropped back down, by Friday to 150,900 (avg. 235,000). The 18 day MVA looks like good support, tapped the last three days on the lows while RARE showed three consecutive dojis. Looking for a move up and breakout. Target: 32
BUY POINT: 27 on volume of 350,000 or higher. Stop: 25.11 (7%)
POSITION: Stock and/or May $22.50 calls to buy (QRH EX).

HB (Hillenbrand--$56.98; +0.08; optionable): Healthcare and funeral homes. Working on a date. Earnings are 2-5-02 before the open.
http://biz.yahoo.com/p/h/hb.html
BACKGROUND: Based upon our research it does not appear that HB has ever split its stock. The company has sufficient shares for a 2 for 1 split.
STATUS: HB broke to a new high last week as it made a solid run up from its 200 day MVA (53.84), hitting 59.15 before pulling back this week on decreasing volume. HB visited below the 200 day three times in September-December as it tried to make its way up in an erratic pattern, but managed to hold the 200 day this time before mounting its strong move. It its trying to hold its 10 day MVA (56.76, with its October highs), showing a doji Friday as volume continued to drop (71,500; average 129,100). Looking for the stock to hold here and make a bounce back up toward the new high. Target if it can take out the high: 64.
BUY POINT: After holding here, a move back over 58 on above average volume. Stop: 54.50.
POSITION: Stock and/or March $55 calls to buy (HB CK - March $55).

LLL (L-3 Communications--$96.70; +0.40; optionable): Defense telecommunications. Working on a date.
http://biz.yahoo.com/p/l/lll.html
BACKGROUND: Based upon our research it does not appear that LLL has ever split its stock. The company has sufficient shares for a 2:1 split.
STATUS: Has come back after September 11, hitting 98.07 in October but then pulling back and forming a saucer over the last four months. Defense issues (and LLL is one) took off Thursday, and LLL was not left out, moving from its 10 day MVA (92.92) to challenge its high. Volume picked up a bit Friday (568,600; average 511,500), but the stock could not make a new high, instead closing with a doji. We will see if it settles back a bit here to form a handle, or if it take off again. Target: 110.
BUY POINT: From here: 98.17 on volume of 765,000. Stop: 92.
POSITION: Stock and/or April $95 calls to buy (LLL DS).

IFIN (Investor's Financial Service--$73.81; +1.22; optionable): Back on the report and we are researching a date.
BACKGROUND: Last announced a 2:1 split on 5-15-00 with a board meeting. The stock price was $82. The annual shareholder meeting was on 4-17-01 at which time authorized shares were increased.
STATUS: IFIN has made a good push up from its 50 day MVA (then 63, now 68), taking out its long-term down trendlines in the process. After the last move it has pulled into a pennant pattern that serves as a handle to a cup dating back to July. Friday IFIN pushed back up from its recent support in the pattern at the 18 day (71.51), with volume dipping back to the light levels we have seen as the pennant develops (187,200; average 215,100). Looking good here, and we are watching for a breakout. Target: 86 (there is resistance at the April and July highs at 80).
BUY POINT: 75.60 on volume of 320,000. Stop: 70.31 (7%).
POSITION: Stock and/or April $70 calls to buy (FLQ DN - under 100 open interest).

BEST PLAYS:

MARKET FAVORITES BEST PLAYS:
1) AMCC - Downtrend
2) TER - Testing resistance

AMCC (Applied Micro--$10.89; +0.44; optionable): Semiconductor.
http://biz.yahoo.com/p/a/amcc.html
STATUS: AMCC lost another battle with its long-term downtrend line (from April 2001 highs and November-December highs) early this month, dropping from 13 back to Wednesday's low of 9.10. The stock bounced from that level (after posting a lower than expected loss), but is encountering resistance now from its 18 day MVA (10.96), moving up slightly the last two sessions on light volume (down to 8.94 million Friday; average 13.3 million). Ahead the down trendline is with its 50 day MVA (11.67). We could some of a move up toward that level, but when it starts to bounce back down we will take downside positions for the next move down. Target: 8.
BUY POINT: A test of 11.50 on continued low volume and a fall through 11.
POSITION: March $12.50 puts to buy (AEX OV).

TER (Teradyne--$29.05; +1.15; optionable): Semiconductor equipment.
http://biz.yahoo.com/p/t/ter.html
STATUS: Made a good move early in the month but got hammered on earnings, gapping back through its 200 day MVA (31.56) and then continuing through the 50 day (29.47) on its way to this week's low of 26.15. It has rebounded, but after an initial surge in volume the move has weakened, stopping short of the 50 day Thursday and Friday, with Friday's volume coming in at 1.4 million (average 2.75 million). Looking for the move to fail, and for TER to drop back and give us a put play. Targeting 24.
BUY POINT: In a weak market, a drop back through 28 on above average volume.
POSITION: March $35 puts to buy (TER OG - no open interest; plenty of April TER PG).

PRE-ANNOUNCEMENT BEST PLAYS
1) TGH - Nice breakout!
2) MRBK - Looking like it could move again
3) GTK - Broke out!
4) AROW - Moving back up strong
5) STU - Resting on the move
6) PII - Forecast for Tuesday
7) YUM - Dipped back out of the handle
8) DRI - Back to the 18 day
9) WLP - Precarious as it hit a new high

TGH (Trigon Healthcare--$73.50; +1.51; 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: Great move! TGH blasted up to a new high on good volume (278,200; average 182,600) as it continued up from its breakout test. TGH had broken out of a saucer with handle recently, which pattern was within a larger pattern going back to late 2000 (highs at 80). It pulled into another handle-type consolidation, holding over its 10 day MVA (71.60) before getting a volume surge on a small Thursday, which was followed by the breakout. A lot of strength, and still a buy up to 76.34 as we target 84, although carefully watching the highs at 80.
BUY POINT: A buy up to 76.34 on continued strong volume. Stop: 68.50-71.
POSITION: Stock and/or April $70 calls to buy (TGH DN - under 100 open interest).

MRBK (Mercantile Bankshares--$44.85; -0.01; optionable): Forecast to announce a split on 3-12-02 in conjunction with a board meeting. The company will not confirm this date, but our research determines this is the date for the next board meeting.
http://biz.yahoo.com/p/m/mrbk.html
BACKGROUND: Based upon our research it does not appear that MRBK 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 3:2 split.
STATUS: Early this month MRBK broke over the center of its large double bottom (44) as it trends up its short-term MVA's (10 & 18 day at 44.56 and 44.20). It tested the move over 44 but could not get much going on the move back up, moving laterally the last week over the 10 day. Friday it tapped back to its 18 day at its low of 44.25, but recovered on lower, but continued good volume of 204,400 (average 181,500). Looking pretty good, and we will see if it can make a strong move out of this little consolidation, targeting 52. The left side high is at 45.13.
BUY POINT: 45.25 on volume of 275,000. Stop: 42.25.
POSITION: Stock only.

GTK (Gtech Holdings--$48.76; +1.36; optionable): 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: Looked to possibly be topping Thursday as it showed a 'tombstone' doji after its nice run up, but it turned out only to be a pause as it measured its prior high. Friday GTK surged up again, breaking to a new high (and completely out of its pennant pattern), moving on increased, solid volume (609,600; average 441,500). It has been a good run up from the 50 day MVA (then 43, now 43.92), so GTK could need to rest; if so, we will look for it to hold over its former high at 47.50. Looking strong, and targeting 55.
BUY POINT: Still a buy up to 49.87 on continued good volume. Stop: 51.20-46.38. We can also look at a strong move up after a test back on lower volume holds 47.50.
POSITION: Stock and/or March $45 calls to buy (GTK CI - low open interest).

AROW (Arrow Financial--$29.80; +0.31; no options): Working on a date.
http://biz.yahoo.com/p/a/arow.html
BACKGROUND: Last announced a 5:4 split on 9-22-99 at a stock price of $26. The annual shareholder meeting was on 5-09-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: AROW has made a nice move back up after having dropped below its December highs (and ending the string of higher lows in its six-month ascending wedge). What started as a low volume move back over the 50 day MVA (28.85) has gained strength, Friday showing volume of 16,900 (average 10,800) as it moved up. The high in the pattern is ahead at 30.25, and for current positions (AROW hit the aggressive buy point Thursday) we will carefully look at that high as AROW could need to rest at that point after the good run. We will see if it can avoid another significant drop back on that move, watching for it to hold up and then take out the pattern high. Target: 35.
BUY POINT: Over 30.25 on volume of 16,200. Stop: 28.70.
POSITION: Stock.

STU (Student Loan--$84.20; +0.70; 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: STU made a very strong bounce Wednesday, making a new closing high as it tried to break from its month-old pennant pattern (formed after its huge breakout in December or its April and August tops at 80). It has slowed down, showing a loose doji followed by a modest move up Friday where it hit the buy point on decent volume (down slightly to 16,200; average 12,500). We will continue to watch for STU to power up from here, but we could see a test back to the 10 day MVA (82.80) as it is having trouble making a clean break here. If it can make the move, targeting 90.
BUY POINT: From here or after a low-volume test back, 84.62 with increased volume. Stop: 79.
POSITION: Stock.

End Part 2 of 3

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