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us stock market, stock trading
Begin Part 2 of 3
THIS WEEK
A lot of economic data out (consumer confidence, Q4 GDP, unemployment, and ISM), but the first big event of the week is the FOMC meeting Tuesday and Wednesday with results to be announced 2:15ET Wednesday. The FFF contract is pricing in less than 30% that the Fed will cut rates by any amount. It is very accurate when it gets down to the nut so to speak, so it would be a surprise to the market if the Fed cut. It is in the position of whether a further cut would be viewed as a negative given the improving economic conditions. With Greenspan's hot and cold testimony to the Senate, however, it is hard for a rational mind to see another 25 basis point cut on top of 11 previous cuts as indicating overly pessimistic views about the economy. He talked of a stimulus package three months ago as good 'insurance;' a further cut at this point would be in line with his thinking.
In anticipation of the FOMC result and what it says afterward as well as the economic reports late in the week, the early action may not have a lot of power behind it and may not give us the stronger signal we look for or prefer to have. Remember, actions taken on rising, above average volume give you a better gauge of a move's strength. If a move is made over or below an important level on rising, above average volume, it is a move we can take more to heart.
Overall our view of the market remains more bearish over the next few weeks until the indexes can test lower. There has been a change in character, and the two upside sessions on rising volume last Wednesday and Thursday do not change that character. Institutions could continue to come in and buy in volume, and that would change the situation. For that to happen the economic numbers this week would need to be very good and the earnings reports would have to start crowing about the action in Q1 and Q2. That has not happened, at least not enough to satisfy investors. That is what has changed: the view of the future; until institutions feel that there is more growth ahead, they are not committing their money.
That is why we will continue to look for the strong patterns to invest in both upside and downside. We will take comfortable gains when they are in hand and bank the profit. The market is not showing right now that it is one we can just jump in and stay in ride; get the gain and move on.
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:
Good movers: ORI broke out of the ascending wedge and remains a buy up to 30.01 on the move (closed at 29.89 Friday in a strong move)! CTX hit the aggressive buy point on its bounce from the 18 day MVA; volume was lower though still well above average. That may improve on Monday or Tuesday to support the stock. Same with BRKS as it hit the aggressive buy point on a move up in its handle; volume lower but still strong on the move.
Other notes: VAST hit the suggested stop alert Friday.
Removed to a watchlist. Some of these still look good but are taking some time and we want to make room for new plays:
SFA: Back over the 50 day MVA on low volume Friday in the handle to the flying 'w'. Aggressive buy point at 26; breakout pivot point is 28.31 for a move up to the 200 day MVA.
CAKE: Dallying around below the 18 day MVA; stronger volume and another test of the 50 day MVA Friday. Looking for a continued bounce from there; the stock hit our aggressive buy point at 35.15 though closed at 34.50. We are still looking for the bounce.
THOR: Too far back in the handle; keeping an eye on it since the stock is above the 50 day MVA still.
RMG: Ready for a test after the cup with handle breakout.
EGOV: Still holding the 18 day MVA but volume creeping up. Keeping our current buy point and keeping an eye on it.
DSTM: Was unable to move much on its last "step" up, so will let it consolidate further.
IONA: Holding the 50 day MVA but we wanted it to stay above higher support, the 200 day MVA.
ORI: See comments at the top of report.
IOM: Tapped the 200 day MVA Thursday on its breakout from the ascending wedge and pulled back on low volume Friday, tapping near the buy point on the low and showing a hammer doji. Ready to head up for the next leg. New buy point is over the 200 day MVA (9.80). Target is 11 for existing positions.
FORG: Fell out of the handle to its small cup and held the lower 50 day MVA, but isn't yet back over the 18 day MVA.
CA: Pulled back a bit suddenly from Wednesday's earnings bolt up. Volume is lower, but CA is headed lower for now; good support at the 10 and/or 18 day MVAs.
ANN: Weak breakout move Wednesday, with the stock showing 2 lateral dojis on decreasing volume just above the breakout day's closing price. Weak breakouts are trouble. Moved up stop loss to 34.50.
CTAS: Still looks good in the ascending wedge/handle, banging around between 48 and 50. Volume is increasing and it is trying to make a move. Keeping a close eye on it.
VARI: Moved up again Friday but on very low volume. Can head out over the January high of 35.21 on a surge; that is the move we are looking for on the bounce from the 50 day MVA.
WCS: Pulled back on very low volume after the breakout. Will likely test the buy point at the 20 range.
Puts: Most have hit the buy point and still below resistance.
NBIX: Hit the buy point Tuesday but bounced back up from the 41 range. Still showing weakness with volume low and at resistance. Buy point is 44 for new aggressive positions. Target is the 200 day MVA (37.50).
ISIL: Hit the buy point Tuesday then bounced back up weakly. Looking for a move down to 22 but is trying to hold up at 28 the last three days with volume falling off. Still can fall from here. Target 24.
ANAD: Still looks weak in the head and shoulders pattern. Is finding support at 12 for now, but cannot move over the 18 day MVA/down trendline. Hit aggressive buy point (13.50) on Thursday.
TNL: Hit the buy point Friday and held with a doji. Tested Thursday's low on the intraday high, and can still drop from here (target: 21).
AA: Still at resistance and has not hit buy point at 34.90 yet. Tried but could not hold a move over the 50 day MVA Friday.
SAGI: Hit the aggressive buy point but it moved up for a very low volume gain. Looks like a small bump up before rolling over.
TMPW: Hit the aggressive buy point Thursday (41.90) but was back over the 50 day MVA that day and Friday. Still below the 200 day MVA at 45 but will need to see it back below the 50 day MVA for current positions.
Best Plays:
1) INVN: Ready for a pullback.
2) TROW: Up on rising volume in the handle.
3) CASY: Its second tap at support and now volume is low; ready to head up.
4) ECL: Ditto.
5) STT: At the base of the handle and a volume spike.
6) GRTS: Ready for a breakout!
7) IRM: Test of breakout and a nice-looking hammer doji.
8) NDC: Broke the 200 day MVA on strong volume (put).
9) JPM: Took out some important support Friday.
New:
Covered Call:
INVN (Invision Tech--$37.00; -1.29; optionable): Scientific & Technical Instruments
http://biz.yahoo.com/p/i/invn.html
STATUS: After a very nice run up, INVN has pulled back from 39.40 reached on its last bounce from the 10 day MVA (33.94). Fell Friday on lower volume, and we look for a pullback in the range of the 18 day MVA at 32.38 for the covered call sale. The recent bounce was weak, so INVN is likely to need the correction back to that support to muster strength for a better upside move. Volume Friday was 2.1 million (avg. 2.8 million).
BUY POINT: 36.95 on a continued low volume pullback.
POSITION: March $35 calls to sell (FQQ CG). Selling for $6.20 at the close Friday; for a drop of 4 points they should be down to around $3.60 at support, where we can buy them back.
http://www.investmenthouse.com/ct/invn.html
TROW (T.Rowe Price--$36.35; +0.16; optionable): Financial
http://biz.yahoo.com/p/t/trow.html
STATUS: Financials are holding up well. Earnings were out Friday morning, and though they came in just below estimates, the stock held its ground at the 18 day MVA (35.99), moving up from the support on rising volume (608,200; avg. 584,000). TROW is in the handle to a 22-week cup with handle, and looks ready for a move back off the 18 day MVA here. This will be the stock's third bounce from the support level since it launched from the 50 day MVA in early December, a move that broke it out over the 200 day MVA at the time. Showing strong money flow and high relative strength. Target: 45
BUY POINT: Aggressive: 36.65 on above average volume. Stop: 34.08 (7%). Cup with handle breakout: 37.75 on volume of 876,000 or higher. Stop: 35.11 (7%)
POSITION: Stock and/or April $35 calls to buy (RQW DG).
http://www.investmenthouse.com/ct/trow.html
CASY (Casey's General Stores--$14.49; -0.01; no options): Grocer
http://biz.yahoo.com/p/c/casy.html
STATUS: Food is doing well these days. CASY broke out of a 13-month double bottom base and is now testing the breakout on a pullback to the 50 day MVA (14.21). Volume was strong on the breakout but has fallen off overall, save for a larger spike just over a week ago. CASY had moved off its 50 day MVA mid-November, bounced about three times from the 18 day MVA, then entered the deeper correction to the 50 day MVA. The stock tapped that support Wednesday and Friday; volume was low, but that suggests a hold here until the stock makes its move (125,700; avg. 158,000). Strong money flow. Target: 18
BUY POINT: Aggressive: 14.70 (over the 18 day MVA at 14.53) on volume of 160,000 or higher. Stop: 13.67 (7%)
POSITION: Stock.
End Part 2 of 3
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us stock market
stock trading
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