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Support and Resistance

Nasdaq: Closed at 1943.91.
Resistance: The 50 day simple MVA (1965.01) continues to act as resistance. It still has not broken free of the November consolidation range from 1934 to 1941 no volume on the move. 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 1133.06.
Resistance: The 50 day MVA (1137.31) is still in the way. After that, there is resistance on up to 1150. Then the 200 day MVA is at 1166.51. 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 9865.75.
Resistance: The 50 day MVA (9874.72). Then 9992 to 10,000. After that the 200 day MVA (10,106.78).
Support: 9750 to 9690 continues to hold. From there 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): 946K (+5.7%) actual versus 923K expected and 934K prior.

1-29-02
Durable Goods 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 Jobless 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: I was wondering if Jon L. Johnson and his team watch or listen to any financial stations throughout the day? If so, which are the better ones to listen to for reasonably unbiased information (if there is such a thing in financial reporting)?

Thanks for you great service.

A: Yes we listen to the financial stations to get an idea of what is being said to the rest of the world about the day's action. That is the primary function: we want to know what the analysts are saying, what the fund managers and CEO's are saying. Are they bullish or bearish? What are they telling their clients? We also watch them for facts such as volume, A/D line, earnings, etc. (anything that is fact and not opinion). We can get this information from our live feeds, but most of us keep the stations running in the background as well. We do not listen with respect to what is a good potential play and what is not, what is a good stock and what is not. There are agendas behind all of the statements besides the disclaimers. As far as unbiased, you have to realize that most guests have a reason they like or dislike a stock, and most of the reporters tend to inject their own biases despite their continued claims that they 'just report the facts.' For example, when one elected official was asked if he had received a campaign donation from ENE and replied he had not, the anchor said 'good for you!' With comments such as that, the stations are best 'watched' w/mute on and not listened to.

As far as stations, I prefer Bloomberg if you can get it during market hours. Not because it has better commentary, but because it gives more information on the screen at one time. It has the screen divided, and since I use it for maximum information, that works best. It also puts up news flashes in red; you cannot miss them even with the volume off! CNBC is not bad, but most of its reporters appear to be journalism majors and their comments are often inane. Ron Insana knows his stuff and is worth listening to when he gets in a critical mood.

In short, use them for information and to get a feel for what the crowd is being told. Use it as a tool for information that is part of your overall plan. It should not replace your own ideas or game plan.

TEAM TRADES

Sometimes I get accused of being downright boring with some of my trades, but there is a theme at work here in the market. The economy continues to show signs of recovering. As it does, financials are doing better and so are transports. This weekend we looked at many and dropped a trade on the Daily, IXX, a packaging company. As many of you know, back when everyone was still all bent out of shape about the 'white hot' economy (excuse me while I go throw up), we reported that containerboard orders were way down, and that was a sure sign the economy was really starting to slide: no orders meant that not as many new goods were being boxed up for shipment and that inventories were piling up. Now it seems things have finally started to reverse.

IXX: A strong move Friday as it tried to breakout of its trading range to a new high. Volume has been surging this month, and that second big spike caught our attention. We were ready to jump on when it cleared the trading range. It rallied higher on the momentum from Friday, but we waited for the initial surge to die down with the market starting off hot and heavy as well. It ran to 21.40 (buy point at 21.25), and then backed down over the next hour to the buy point and held. It started to bounce. Volume looked decent, so we issued an alert and entered a straight stock trade (no options). We were set. The stock then turned with the market and dropped. Crap. Down to 21.05 over the next 2.5 hours. Then it hit bottom and started higher. It ran up to 21.25 to 21.30 and found resistance; makes sense as that was the breakout point. Then it jumped up from there and was off to the races. It ran a half dollar in the last half hour, and we were looking for more positions, but in issuing some other alerts we were not in time before the final bell. A very good move, and we bet it continues to move well though it might take a pause to rest before continuing on.

PLAYS TO LOOK AT: Lots of stocks on the report making the plays. Great moves today by LLL, RYL and STU, and BLL and LSTR continued their great runs. JPM made the drop we were looking for as well.

BONUS PLAYS:

SBYN (Seebeyond--$12.20; -0.51; optionable): Software.
http://biz.yahoo.com/p/s/sbyn.html
STATUS: In a cup with handle started back in June (highs at 16), and made a good push back up in the handle to finish last week. It pulled back in the pattern today, but volume was greatly reduced to 669,300 (average 1.04 million) and it closed comfortably over its short-term MVA's (10 day at 11.96). Looking for the stock to hold and make a run for a breakout. Excellent money flow and buying. Target: 16.
BUY POINT: 13.55 on volume of 1.5 million. Stop: 12.60 (7%).
POSITION: March $12.50 calls to buy (QYS CV).

CHUX (O'charley's--$22.24; +0.53; optionable): Restaurants.
http://biz.yahoo.com/p/c/chux.html
STATUS: Broke out in early January from a reverse head and shoulders. After the initial move it consolidated a bit and ran a bit move. It has recently pulled back into a handle-type consolidation, holding its 18 day MVA (21.17). Today it bounced, moving on increased volume (140,700; average 115,200), pulling back from the intraday high at 22.55 (the handle high). Buying is very strong. Target: 16.
BUY POINT: 22.65 on volume of 170,000. Stop: 21.06 (7%).
POSITION: Stock only.

MARKET FAVORITES:

NSM (National Semiconductor--$28.42; +0.53; optionable):
http://biz.yahoo.com/p/n/nsm.html
STATUS: Took a hard dive this month, finally finding support last week at 26 and bouncing. The bounce is a test of the 200 day MVA (28.72), and today NSM reached over that level at its high of 28.88 but pulled back to close. Volume continued to dip (1.66 million; average 2.49 million), and the move could be out of steam here with the tough resistance just above. Looking for NSM to turn back down again, watching the recent low as there is some support there, but 25 shows more support and we will target that level initially.
BUY POINT: A drop through 26 on above average volume.
POSITION: March $30 puts to buy (NSM OF).

PRE-ANNOUNCEMENTS: Worth a look are IFIN, TGH, EXPD, and GTK could make a pullback.

RARE ($23.74; -0.36): We are working on a date, but it moving right into range. Nice-looking handle, and RARE showed another doji today as volume continued to dip, as it should in a gently descending handle (114,100; average 236,600). Holding the 10 day MVA to close (18 day at 25.23), and looking for a breakout from this nice pattern. The buy point is 27 on volume of 350,000 or higher, with stock and/or May $22.50 calls to buy (QRH EX).

HB ($57.02; +0.04): Working on a date. Earnings are 2-5-02 before the open. Testing the breakout, and again tested near its 18 day MVA (56.17) at its low today before recovering to hold the 10 day (56.80) to close. Volume was up (115,300; average 129,200), and HB could be ready to bounce again. We are looking for a move back over 58 on above average volume, with stock and/or March $55 calls to buy (HB CK - March $55).

LLL ($100.00; +3.30): Working on a date. Nice move! LLL continued its solid run, breaking out of its saucer (left-side high 98.07) as volume was very strong at 918,500 (average 507,000). Targeting 110, and still a buy up to 102.97 although we could get a bit of a rest here before the next strong surge as 100 can represent a psychological barrier, but will watch for it to hold the prior high. Stock and/or April $95 or $100 calls to buy (LLL DS or LLL DT).

STU ($86.02; +1.82): Researching a date, as due for a split. Another pretty move, as STU blasted up on excellent volume (26,400; average 12,600), making a new high. It had been trying to breakout from its pennant, and last week put us on notice with a strong move up. Could give us a couple of more points on this move before it comes back to the short-term MVA's (10 day at 83.39). Targeting 90, and still a buy up to 88.62, with stock.

PII ($56.70; +0.65): Forecast to announce a split on 1-29-02 before the market opens in conjunction with earnings. Tried to bounce going into the split, but although it made its over the short-term MVA's today (56.19), volume continued to be very weak (47,600; average 109,300). We will see what comes in the morning, and with an announcement and a move over 57.50 on above average volume, stock and/or March $55 calls to buy (PII CK).

DRI ($37.50; -0.05): We are working on a date. DRI's last move did not amount to much, topping at 39.15, but it appears to want to hold the 18 day MVA (37.40), holding that level today to close with a 'shooting star' doji on continued strong volume (901,700; average 712,800). Looking for another bounce, with the usual bounce (before the $2 bounce last week) of $3-$4. The aggressive bounce play is a move over 38.16 on increased volume, with stock and/or April $35 calls to buy (DRI DG).

PRE-SPLITS: SONC could try a stronger bounce, and FRED could be finding close support for its next move.

FRED ($41.53; -0.72): Splits 3:2 effective February 4. FRED has shown topping signs by creeping up with consecutive dojis as it approaches its high of 43.86. Today it pulled back, but selling volume was not big (186,800; average 201,500) and it pulled off of its 10 day MVA (40.64) at its low. If it can hold the 10 day, it could set up for another pre-split run over the high. After showing us it can hold (and if it cannot we are exiting any remaining positions), we are looking for a move over 42.50 for another pre-split play, with stock.

BLL ($74.91; +1.62): Splits 2:1 effective February 22. BLL has made a great run for us, and today took out its former high (74, from December), again pulling back off of its intraday high (75.75) to close. It has been such a solid run that it is due for a rest, and we will look for it to hold 74 to rest and set up again. If we get a steeper drop we take profits and wait for the next pre-split move.

CONTINUING CANDIDATES:

TGIC ($39.00; -0.49): Pulled back again in the handle to its cup, but surged back from a low of 37.75 (18 day MVA at 38.26) with very strong volume (77,000; average 40,400). A strong recovery, and we are still looking for a breakout, with the buy point 40.26 on volume of 60,000, with stock.

RYL ($77.80; +3.05): Surging on earnings, and today RYL continued up to a new high today, blasting over the December high (75.85) on continued great volume of 540,800 (average 358,800). Like to see all these stocks hitting the buy points and breaking out, and we are targeting 85. Still a buy up to 79.64, but we could get a test of the former high before going back up. On the move, stock and/or April $70 or $75 calls to buy (RYL DN or RYL DO).

EDS ($61.80; -2.15): One that has been on the watchlist, and looks like it is really going down. It broke through the 200 day MVA (63.12) today, selling through that key support on huge volume of 5.97 million (average 2.99 million). We will see if it starts a free fall from here or if it tests toward the 200 day before dropping again. Targeting 56. Looking for a drop through 61 from here on continued strong volume. On a test back toward 63, a drop back through today's close. March $70 puts to buy (EDS ON - check delta, etc. with your broker, as not available at the time of writing).

POST-SPLITS: CHS appears to be topping after its move.

CHBS ($33.84; +1.04): Bounced back up today after testing the 18 day MVA (32.63), moving on good volume (586,000; average 386,600). CHBS has formed a pennant, and is showing good price/volume action. On a move over 34.45, stock and/or March $30 calls to buy.

VAR ($36.85; +0.40): Moved up a bit in the handle to its 'flying w' pattern, closing just under one of its long-term down trendlines. Volume was up on the move (514,600; average 265,000), and we are looking for a move over 37 on volume continued strong volume (minimum 400,000), with stock and/or May $35 calls to buy (VAR EG).

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.

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