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Begin Part 2 of 2
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.
THE PLAYS:
Reading the Plays: Please note that when we reference the 10, 18, and 50 day moving averages (MVA), those are exponential moving averages (EMA). The 200 day moving average is always simple (SMA). We will note when we reference a particular MVA differently, e.g., a simple 50 day MVA. Please click on the Yahoo and chart links for company and charting information. A "prior high" refers to the high at the start of a base.
For conserving space on listings of stop losses, the symbol (7%) indicates that the stop is 7% below the buy point.
Good movers: Breakout from RNBO! Good volume on the pop out of the test of breakout pullback. IXX broke out as well in a strong move! LLL hit the buy point of 98.17 for the saucer breakout! At the same time, the stock hit our target (98) for the break of resistance play lower in the base that we started earlier. Current target is 110. Nice moves in today's market!
Stop Advisories hit today: IGT (62), TIER (18.45), SRCL (55.06).
Targets hit: LLL
Stocks/Indexes from the Saturday report:
VVUS: Holding just below 10 day MVA, after bouncing Friday off the 18 day MVA.
CNMD: Still looks good in the ascending wedge, ever-tightening in the tail.
HIB: Moved higher with volume continuing to decrease (though still strongly above average); in the handle to its 21week cup.
IXX: Gapped higher in a strong move. Hit the buy point (21.25) in the trading range.
ELON: Gapped higher doji on decreasing but still high volume after Friday's strong break of the 200 day MVA. Can head higher from here if the market is supportive (lower volume today on the Nasdaq).
SMTC: Put play. The stock popped back over the resistance (200 day MVA) on sharply reduced volume. Tapped the 10 day MVA on the high and closed lower but is holding the support. Buy point is 33 (closed at 34.08).
Continued Plays:
ANSR: Shooting star doji in the handle, after selling below the 18 day MVA Friday on stronger volume. These dojis can suggest a bottom to the sell-off/pullback and move back up.
CBR: Up again on stronger volume; pushing at resistance at the 11 range; if it breaks here can give an explosive move higher; if not, can pull back to the 18 day MVA at 10.51.
KSWS: Testing its breakout above the 10 day MVA on very low volume. Can pull back to 36 before heading out for the January high at 39.45.
PDG: Testing the 18 day MVA on low volume in the handle to its cup with handle.
SBGI: Looks good in the cup with handle (buy point 10.32); see the 1-23 report.
WEDC: Tightening up nicely above the 10 day MVA in the handle to its cup base (kind of resembles an ascending wedge), on low volume. Buy point 7.70 for stock.
SUBSCRIBER'S CHOICE:
ET (E*Trade Group--$10.16; -0.46; optionable): Internet Software
http://biz.yahoo.com/p/e/et.html
STATUS: ET is in a large base that started back in the spring of 1999 near $60. It is by now off the lows from September (at 4) and has shown a definite uptrend from there. The stock broke over the 200 day MVA in November, resulting in a pullback (handle to a 6-month cup) to the 50 day MVA, ahead of an early December breakout (strong earnings). Since then, ET has made one more breakout move, from a flying plateau pullback into its 18 day MVA early this month. Volume was lower on this breakout, however, and ET succumbed to resistance at the 12.50 range and has tested back to the 50 day MVA, heavy profit-taking several days ago also added to the punch. Volume was high Monday with the stock bouncing a bit from its 50 day MVA (3.68 million; avg. 3 million). We would look for consolidation at the 50 day MVA if the stock can hold (if not, 9.00 to 9.60), then another start to a new leg up, looking at new positions on a strong break above the 18 day MVA (10.75).
BUY POINT: For aggressive positions: After a hold at the 50 day MVA, on a strong move over the 18 day MVA. January high is 12.64, for higher entry points.
POSITION: April $10 calls to buy (ET DB).
http://www.investmenthouse.com/cd/et.html
Best Plays:
1) TECD: Ready for a pullback.
2) QDEL: Looking for a bounce.
3) GLG: Testing the breakout.
4) PENN: Bouncing on strong volume.
A Covered Call sale play:
TECD (Tech Data--$49.72; +0.39; optionable): Computers Wholesale
http://biz.yahoo.com/p/t/tecd.html
STATUS: The stock has been running since making a bounce from the 50 day MVA, helped along by the 18 day MVA, which is currently at 46.80. TECD looks ready to top out here, as rising volume didn't move the stock much Monday and the intraday high tapped again (as it did Friday) at the 50 level. Higher volume and little movement in the stock means it could be churning, and that indicates a potential move back down (1.07 million; avg. 840,000). If so, we can look at selling covered calls on a move back down to the 18 day MVA, buying back the calls at the support, after they have diminished in value. We pocket the difference. At the close of trading Monday, March $45 calls were selling for $6.40 with a good delta (0.78). For a move of almost 3 points, those calls can fall in value to about $4.25 before the stock bounces. There is potential support at 48, range of the December high and an early January high, so will watch that level on the move down.
BUY POINT: On a move below 49.50 on rising volume, preferably.
POSITION: March $45 calls to sell (TDQ CI).
http://www.investmenthouse.com/cd/tecd.html
New: Some good patterns. Remember, in this market on upside action we are looking for a 15-20% move up to targets on the stock and at that point taking our profits.
QDEL (Quidel Corp--$8.00; +0.10; no options): Drugs: Diagnostic Substances
http://biz.yahoo.com/p/q/qdel.html
STATUS: QDEL is in a 2-year base (highs near 11), and has been trending up from the basing lows at 3 (April of 2001). The stock got new life after the September lows, breaking out over the 50 day MVA and has bounced up that support and the 18 day MVA since. Currently, QDEL has tested the 50 day MVA again, where it is currently finding support (7.63), and bouncing from there the last three days to bang up against the 18 day. Volume remains below average (as for the last 7 days) but was higher Monday at 155,100 (avg. 177,000). We are looking for the bounce to gather some steam here and break ahead, for a run to our target at 10.50 to 11. The stock is showing strong money flow (leading price), and high relative strength. Buying is outstanding.
BUY POINT: Aggressive: 8.15 (over the 18 day MVA at 8.05) on volume in the range of 180,000 and rising. Stop: 7.58 (7%)
POSITION: Stock.
http://www.investmenthouse.com/cd/qdel.html
ITRA (Intraware--$1.96; -0.06; no options): Internet Software
http://biz.yahoo.com/p/i/itra.html
STATUS: Very long base of 2 years, but off the lows and back over its 200 day MVA. It put in a very nice run up the right side of its 7-month cup, and now is pulling back in the handle, finding apparent support at the 18 day MVA (1.92). Volume has fallen back relatively speaking, in the gradual manner that we like, and by Monday was down to a low 196,100 (avg. 326,000). The stock looks like it will continue down to the 18 day from here, but may give a bounce intraday. On that move, aggressive players can look at taking positions for the move up. Breakout from the cup with handle is over 2.42. Excellent money flow and buying. Target: 3.10
BUY POINT: Aggressive: 2.15 on rising volume. Stop: 2.00 (7%). Breakout: 2.52 on volume of 489,000 or higher. Stop: 2.34 (7%)
POSITION: Stock.
http://www.investmenthouse.com/cd/itra.html
GLG (Glamis Gold--$4.08; +0.02; no options): Metals & Mining
http://biz.yahoo.com/p/g/glg.html
STATUS: Broke out of a 15-week cup with handle base earlier this month and put in a nice little run on the move, topping out at 4.40. GLG has now tested the breakout back to the 18 day MVA (3.99) and for the last 2 days has shown readiness to move up though volume has been low (down again Monday to 143,700; avg. 191,227). The stock closed right at its 10 day MVA, so we are looking for a continued hold here or the 18 day MVA for a good bounce back up. The breakout move was launched from the 50 day MVA and this, if GLG takes off from here, will be the stock's first bounce from the 18 day MVA after that breakout. We can look ahead to possibly getting a few more of these bounces, too, if GLG can follow through here. Initial target on this move: 5.25
BUY POINT: 4.10 on volume of 192,000 or higher. Stop: 3.81 (7%)
POSITION: Stock.
http://www.investmenthouse.com/cd/glg.html
Update:
PENN (Penn National Gaming--$31.85; +1.03; optionable): Leisure
http://biz.yahoo.com/p/p/penn.html
STATUS: PENN recently tested back to the 50 day MVA (at that time at 26) then bounced nicely, backed by some heavy buying; it reached a new high for this month after moving over the previous high from December before pulling back again. On Friday the stock tapped the 18 day MVA (29.68), bounced, and on a big jolt of volume Monday continued that move, breaking to a new all-time closing high. Volume was strong again, showing the institutional support, at 633,000 (avg. 222,000). Bear Stearns was out with a report today that pegged the company as one that stands to benefit from the expected growth of the horse-racing industry through legislative and technological change. Looking for a continued bounce. The stock has good money flow and high relative strength. Initial target: 36
BUY POINT: 32 on continued strong volume. Stop: 29.71 (7%)
POSITION: Stock and/or April $25 or $30 calls to buy (UQN DE or DF). Please check with your broker for deltas.
http://www.investmenthouse.com/cd/penn.html
PORTFOLIOS: Each report, we look at these to see which is in a buy position. We don't cover them all each time, just the ones that look ready to pick up a few shares.
THE LEADERS: ACS, NVDA, DGX, FRX, LLL, KRON, MIK, BMET, APPB, IGT
NVDA: Continued the move off the 18 day MVA, the second chapter to the stock's 50 day MVA bounce back. Volume was slightly up which was good considering it was lower on the Nasdaq, and the stock closed just a cent off its high.
IGT: Sold heavily Thursday and broke the 50 day MVA Monday after Friday's hold at the support. Volume was even lower, though, and the stock bounced off its low of 61. May be able to hold at the lows in a November lateral consolidation due to the low volume. If so, will look for a quick move back over the 50 day MVA. We were looking for a correction after the strong uptrend, but don't like the break of this support.
KRON: Will test back to the 50 day MVA at 50 and we will want it to hold there. Volume has been lower the last 2 days so that is a good possibility. We will then try to catch it when it looks ready to move back up. The January highs are near 50 so will look for the bounce play at that point.
UP & COMERS PORTFOLIOS: BBBY, SRCL, EBAY, KG.
BBBY: Gapped up from the 50 day MVA and was over its 18 day MVA Monday in a surprise move as the stock enjoyed upbeat comments from a fund manager. This is the kind of market (and BBBY has been hanging at the 50 day MVA for several days) in which good news can bust a stock higher. Of course this wasn't a strong move, but we can look for a hold at the 18 day MVA if it pulls back.
SRCL: Broke the 50 day MVA on high volume and no specific news. SRCL sold back to the support Friday and on this move took out the up trendline connecting October and November lows. It tapped near 50 on the low and bounced, and if it can eke higher could offer an opportunity to exit current positions.
MEMBER PORTFOLIO: BRCM, AMAT, JNJ, MSFT, BUD.
We have had to weed out the portfolio with some stocks breaking down. So, new year, new stocks. Send us in your votes and we will re-stock with the stocks getting the most votes.
BUD: Higher volume Monday and a small move up after the stock recovered Friday back into the range of the ascending wedge test of the breakout. We are watching to see how this stronger volume will influence the stock.
Good Investing!
Jon L. Johnson and The Daily 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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