us stock market, stock watch

Begin Part 2 of 3

TEAM TRADES

Again there was action both directions today, including some index puts. We also closed on some targets hit with alerts sent on JPM puts and TMCS upside action.

FILE is a software stock we are covering on the SSR, watching for its move to break out of its cup with handle, a move that coincided with support at the 50 day MVA. We liked that it held the 50 day MVA on its handle, and today it was blasting higher on strong volume. Given the market, we were going to wait and let the move take shape and check the volume closely. The stock was up strong in the first half hour, but we were not ready to buy it yet. We wanted to see how the first surge panned out for the stock and the market. as the market pulled back FILE did the same, but it held nicely at 20.80 after hitting right at the breakout point on the first surge (21.53). It held on and moved laterally for two hours. We were watching some big volume build, and when the stock made the move over the breakout point near 1:30ET, volume was running in excess of 200% of the daily average. The decision to buy was easy at that point, and we stepped in at the ask. The stock continued up, ran to 22 and then did what stocks often do, fell back to test the breakout. It undercut and went down to 21.15; a bit of concern given that some stocks have been running up on strong volume and then reversing. It managed to catch itself, however, and then rallied up to close near 22 on some super volume. Nice breakout, now we see if it holds for a quick 15% to 20%.

THE PLAYS: WEDC managed a very strong move despite the rough day, and EDS made a fabulous put play, with JPM also making the downward move we were looking for!

BONUS PLAYS: WEDC still a buy on a break over its recent high at $8.

GS (Goldman Sachs--$84.48; -3.37; optionable): Banking.
http://biz.yahoo.com/p/g/gs.html
STATUS: GS has pulled back steadily from its early January high over 97, taking out its 200 day MVA (86.81) last week. It battled back to test over that level, but today turned back and was spanked back through that former support, selling on sharply higher volume (5.55 million; average 2.8 million) in a tough day for financials (among others). Strong downward momentum, and we will see if it continues its drop from here or if it tests the 200 day before continuing the drop. Target: Has some support from prior levels at 80 we need to watch, but looking for a move down to 75.
BUY POINT: A drop through 83.50 on continued strong volume, from here or after a brief test higher.
POSITION: March $90 puts to buy (GS OR).

FRE (Freddie Mac--$65.65; -1.56; optionable): Mortgage investment.
http://biz.yahoo.com/p/f/fre.html
STATUS: FRE hit down to lows at or near 62.50 each of the last two months, and surged in early January back over the resistance it failed to take out in December; namely, the 200 day and 50 day MVA's (66.05 and 66.25). However, after topping on the last run near 70 (in its June-August range), FRE has dropped back, and the selling has picked up steam. The stock tapped the 50 day at its low and recovered Monday, but today it collapsed through that level and the 200 day on increased volume (4.02 million; average 2.96 million). Looks like a possible visit to the recent lows, and we will gauge at that point if it is going down to 60 or lower.
BUY POINT: Below 65 on continued strong volume.
POSITION: March $70 puts to buy (FRE ON).

PRE-ANNOUNCEMENT PLAYS FOR THIS WEEK: PII did not announce, and got hammered on earnings.

BEST PLAYS:

MARKET FAVORITES BEST PLAYS: AMCC and TER started down, but volume was not strong on the selling.
1) NSM - Dropped back hard after testing former support
2) FLEX - Another failed move on resistance
3) MU - Dropping out of a head and shoulders
4) GE - Precarious position

NSM (National Semiconductor--$27.74; -0.68; optionable):
http://biz.yahoo.com/p/n/nsm.html
STATUS: We watched as NSM challenged its 200 day MVA (28.75) after having dived through last week, and after gapping over that level today (high of 29.72) NSM turned over and ran down hard. Volume spiked up sharply to 3.44 million (average 2.48 million), and NSM looks like it is going to continue down. This was the move we were looking for, and we will watch support from the recent low at 26 but our initial target remains 25.
BUY POINT: A drop through 27.50 on continued strong volume.
POSITION: March $35 puts to buy (NSM OG).

FLEX (Flextronics--$22.46; -0.85; optionable): Printed circuit boards.
http://biz.yahoo.com/p/a/flex.html
STATUS: We looked at FLEX recently as it has had trouble after challenging its down trendline in December. It recently gave up its 200 day MVA (23.73), catching support in the 22 range to try the 200 day again. That level has held as resistance twice more, including today as FLEX dropped back on increased volume (9.81 million; average 10.8 million). Looks weak, although it again pulled back up to close after tapping near 22 (22.06 intraday low) today. We are looking for FLEX to take out that level on increased volume, targeting 18.
BUY POINT: Below 21.50 on above average volume.
POSITION: March $25 puts to buy (QFL OE).

MU (Micron--$30.49; -1.81; optionable): Semiconductor
http://biz.yahoo.com/p/m/mu.html
STATUS: MU's solid move over its 200 day MVA (34.04) early this month failed, and it tumbled back to the 50 day (31.28). It bounce there a bit, and that action formed the right shoulder of a head and shoulders pattern (formed since early December), and with MU taking out the 50 day today on increased volume (7.36 million; average 7.55 million), we are looking at a breakdown and a put play down to October-November levels at 26.
BUY POINT: A move below 30 on increased volume.
POSITION: March $35 puts to buy (QFL OG).

GE (General Electric--$36.34; -1.69; optionable): Conglomerates
http://biz.yahoo.com/g/ge.html
STATUS: Broke recent support at the January lows (37.50 range) on strong volume Tuesday, up to 36.3 million (avg. 18.2 million). December low is 36.21, very close on this strong move. We are looking for a drop to the 32.50 range for an initial target; below that, 31.30 to 28.50, the September low.
BUY POINT: 36 on continued strong volume.
POSITION: March $40 puts to buy (GE OH).

PRE-ANNOUNCEMENT BEST PLAYS
1) RARE - Rare indeed on a session like today's
2) BRL - Broke major support
3) LLL - Forecast for tomorrow
4) TGH - Testing the breakout
5) YUM - Wants to breakout
6) GTK - Topped on the run but stingy with gains
7) AROW - Looking to continue setting up the pattern
8) HB - We'll see if it can hang on and bounce
9) STU - Disappointing turnaround

RARE (Rare Hospitality--$26.10; +0.05; optionable): Restaurants. Forecast to announce a split on 2-19-02 with earnings. The company has not confirmed the date.
http://biz.yahoo.com/p/r/rare.html
BACKGROUND: Last announced a 3 for 2 split on 7-26-00 in conjunction with earnings. The stock price was (jon or jay please fill in price) The annual shareholder meeting was on 5-14-01 at which time authorized shares were increased. The company has sufficient shares for a 2 for 1 split.
STATUS: RARE was able to make a move today in the market carnage, moving up with strong volume (469,100; average 234,800). 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 has formed a handle and today's move takes it up near our buy point, which is based on the intraday high in the handle of 26.90 (excluding the peak at 27.50 hit on an intraday spike). The high volume move looks good for a possible continuation 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).

BRL (Barr Labs--$72.24; -2.05; optionable): Generic Drugs.
http://biz.yahoo.com/p/b/brl.html
STATUS: BRL dropped out of its extended lateral consolidation last week, and volume finally kicked in today as the stock dropped hard through the support of its 200 day MVA (73.64). Strong downward momentum now, and we will look for a continued drop. There is possible support from some prior price levels (September and a couple of touches from November-December) at 70, but we are looking for a drop to 65 or even the November lows of 59-62.
BUY POINT: From here or after a test toward the 200 day: A drop through 71.50 on continued strong volume.

LLL (L-3 Communications--$97.23; -2.77; optionable): Defense telecommunications. Forecast to announce a split with earnings tomorrow before the open.
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: Made a great move and broke out from its saucer pattern (dating from October), but pulled back today after hitting a new high at 100.90. On the pullback it tested toward the 10 day MVA (94.76; intraday low at 95.75), pulling back up a bit to close in the range of its left-side highs, and not giving up all of Monday's gain. Volume was down but still strong at 803,700 (average 504,000), so we will see if LLL can hold a test of the breakout and continue to show strength. With an announcement and some favorable earnings we could see a continuation of the move, and we are targeting 110 with current positions.
BUY POINT: With an announcement or a strong reaction from earnings, a move over 98.50 with continued strong volume. Stop: 92. If we get a gap up over the buy point, we will see if it comes back to test it before moving up again. If things settle a bit on the news we will see if it holds the 10 day, and we can look at positions on a strong move back up from there.
POSITION: Stock and/or April $95 calls to buy (LLL DS).

TGH (Trigon Healthcare--$72.46; -0.23; 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: Made a nice breakout move Friday, but like so many moves of late, it pulled right back the following session. Not the worst move, however, as volume was much weaker on the test back and the stock held to close over its prior high. Today the action continued and again was not bad, as TGH gapped down and showed a tight doji over the former closing highs and 10 day MVA (71.92), with volume dipping even more to 109,600 (average 182,800). We will see if it can hold here, as a stock should on a good breakout. With strength we are still targeting 84, although carefully watching the highs at 80.
BUY POINT: From here: A move over 73 on above average volume. Stop: 67.98.
POSITION: Stock and/or April $70 calls to buy (TGH DN - under 100 open interest).

YUM (Tricon Global--$53.35; +0.29; optionable): Forecast to announce a split on 2-6-02 after the market closes in conjunction with earnings.
http://biz.yahoo.com/p/y/yum.html
BACKGROUND: Based upon our research it does not appear that YUM has ever split its stock. The annual shareholder meeting was on 5-17-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: YUM continues in the handle to its double bottom pattern. It pulled back after hitting the level of the center of the pattern, forming the handle which has held support n the range of the left side high (52 range) and over the 50 day MVA (50.94). Today YUM continued back up with a stronger move, coming on volume of 818,900 (average 770,900). Looking for a continued move toward the breakout (handle high 54.55). The stock is in a very large base dating back to early 1999 with highs at 70. Target: 62.
BUY POINT: Breakout: 54.67 on volume of 1.2 million. Stop: 50.84.
POSITION: Stock and/or April $50 calls to buy (YUM DJ).

GTK (Gtech Holdings--$48.78; -0.36; 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: GTK made a nice move as it broke to a new high, but the move, which started near 42, looks tired. GTK showed the classic topping sign yesterday of a 'tombstone' doji - the stock reached up intraday but then pulled all the way back to close as sellers took over from the buyers. That typically indicates a drop is in store, but GTK did not tumble back down. Instead, it held strong on a modest drop, recovering from an intraday low of 48.31 as volume dropped back a bit to 544,800 (average 447,045). Looking for GTK to hold its prior high at 47.50 (10 day MVA at 46.94), using that level to gear up for another move. Still targeting 55.
BUY POINT: After holding 47.50 on this pullback, a move back over 49.50 on continued strong volume. Stop: 46.50.
POSITION: Stock and/or March $45 calls to buy (GTK CI - low open interest).

AROW (Arrow Financial--$29.60; -0.20; 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). Today it reached up to 30 at its high, the level of many of the highs in the pattern, but it pulled back to close, moving on strong volume of 17,400 (average 10,900). AROW hit the aggressive buy point last week, and this move might be done, but we will see if it can hold the short-term MVA's (10 day & 18 day at 29.27 and 29.13), going back to its prior pattern of making higher lows, and finally make a breakout. Target: 35.
BUY POINT: Over 30.25 on volume of 16,200. Stop: 28.70.
POSITION: Stock.

HB (Hillenbrand--$56.55; -0.47; optionable): Healthcare and funeral homes. Forecast to announce a split on 2-5-02 before the open with earnings.
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 made a huge move recently, breaking to a new high on a solid run up from its 200 day MVA (currently 54). It hit 59.15 before pulling back last weak on decreasing volume, and is now trying to hold its 18 day MVA (56.21, with its December high), tapping down to that level each of the last two session lows. HB visited below the 200 day three times in September-December as it tried to make its way up in an erratic pattern, but after holding it the last time and making the solid move, we are looking for it to hold here and set up another move as we go toward the forecast. Target if it can take out the high: 64.
BUY POINT: After holding here, a move back over 58 on above average volume (129,300; today 91,600). Stop: 54.50.
POSITION: Stock and/or March $55 calls to buy (HB CK - March $55).

STU (Student Loan--$84.11; -1.91; 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 has made an impressive run lately, and made a strong move over its pennant pattern that culminated in Monday's big move. It did not hold up well, however, as today STU turned back around and pulled back to its recent pattern highs, holding just over the 10 day MVA at 83.52 Not good action as volume was much stronger on the selling at 39,900 (average 12,900). We will see if it can hold, but are wary of the high-volume selling. The recent support is the 18 day MVA (82.69), and if it gives that up it could be going to the 50 day, at 80.

PRE-SPLITS BEST PLAYS: Remember, we try to grab these as they break out of good patterns or as they start a run right before the split. Not looking for home runs, but looking for those $3 to $4 moves running into the split, watching for topping signs and potential resistance. Not huge money, but it can be very steady. We set our initial stops at the 7-8% range below the purchase price (or just below obvious support), and move them up on a move to preserve our profits.
1) SONC - Tightening and looking for a bounce
2) FRED - Holding strong

SONC (Sonic--$35.72; -0.22; optionable): Restaurants. Splits 3:2 effective 2-9-02.
http://biz.yahoo.com/p/s/sonc.html
STATUS: SONC is tightening into something of a pennant pattern, holding support over its 50 day MVA (34.74, which it tapped at its low Monday). It is having a bit of trouble with the 36 level, but did not give up much ground today after hitting a high of 36.10, closing with a loose doji. Forming up here as a decent pattern, settling down from some of the wild intraday swings we have seen lately. We will see if it tucks back down toward the 50 day again, but from there or here we are looking for a solid move up on a pre-split run. On a move we will carefully look at the high (37.65, although it has pulled back from intraday moves over 37 twice recently) as resistance that could turn it back. If it can take out that level, we can target 40.
PLAY: Aggressive: Over 36.50, with stock and/or March $30 calls to buy (ZXQ CF). Stop: 34.

FRED (Fred's Inc--$41.75; +0.22; no options): Discount retailer. Splits 3:2 effective February 4.
http://biz.yahoo.com/p/f/fred.html
STATUS: FRED made a nice pre-split and then showed topping signs as it showed consecutive dojis on smaller move up. However, it has not tanked, but has held over the support of its 10 day MVA (40.84), moving somewhat laterally the last several sessions with dojis. Today it reached up to a high of 43 in a bid to move again, but ended up pulling back to close with a doji. We still could get a drop back, but with the resilience it is showing we will continue to watch for another quick run going into the split. The high is 43.86.
PLAY: Aggressive: After showing us it can hold (and if it cannot we are exiting any remaining positions), we are looking for a move over 43 for another pre-split play, with stock.

End Part 2 of 3

us stock market
stock watch