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Begin Part 2 of 2

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): +2% versus 1.3% expected and-4.8% prior.
Consumer Confidence, January (10:00): 97.3 actual versus 96.0 and 93.7 prior.
FOMC Meeting started

1-30-02
GDP-Adv., Q4 (8:30): +0.2% actual versus -1.1% expected and -1.3% prior.
Chain Deflator-Adv., Q4 (8:30): -0.3% actual versus 1.9% expected and 2.2% prior.
FOMC Meeting (2:15): FF rate unchanged.

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. In your reports you will mention for some options whether there is low open interest or no open interest. How am I supposed to interpret this?

A. Open interest tells us how many options contracts are open. We look at open interest because it tells us the liquidity of a particular option. If there is low liquidity, there is typically not going to be the same opportunity to 'shave' the spread - that is, get a price inside the ask if you are buying or the bid if you are selling. Also, a major consequence of low open interest is the effectiveness of stop orders. We can use stop orders on options like we can with stock, but with an option with low open interest there may well not be a trade that will trigger your stop. This makes it advisable to manually enter your sell price when a target or stop price has been hit.

We point out that there is less than 100 open interest because we find that over 100 can provide the necessary volume to overcome the problems discussed in the preceding paragraph. The more the better, but when you get under 100 liquidity becomes a real issue. Moreover, even if there is over 100 contracts out there, we do not like to be more than ten percent of the market. Having a substantial amount of open interest is nice, but does not mean much if a large chunk of it is your own position.

TEAM TRADES

We took some profits when targets were hit on plays from the reports, e.g., ACFE, ACF, EAT, PCS and FRED. We also had some trailing stops hit that helped preserver some gain on stocks that had rallied but just had not hit the target (e.g., AMZN, CBR, BLL, ARX, AMTD).

GNSS: Were really ready for this stock to fall as it had broken below support, tested, and was heading lower. It was and we jumped on board about a half hour into the session when it moved below 57.25. The stock then tanked to 55. And then it recovered back to close at 57.70. Volume was strong but less than the selling; it is still below the 50 day MVA that has pushed it back the last two times it tested it. We still like it to the downside.

OEX: We were ready for this one when it crossed 556.95. It did that about 35 minutes into the session. It started down and hit 546 on the low just 2 hours later. A quick 10 points; we thought about taking some money off the table, but the selling was vicious and lots of distribution. When it bounced, we figured it was due for a bounce after such a hard selloff. It made it back to 550, a point where it has bounced down from and up from in the past. It moved sideways at that level for 45 minutes. We were thinking it would turn lower, then it moved higher. We never got the selling we were looking for late in the session. Still holding the positions because the index is still in trouble, but we HATE riding them back up like this. Still, the big picture as to why we took the position is still in place, and we will have to have patience to let it play out just as we did last time.

PLAYS TO LOOK AT: Some great plays were able to hang on and keep running, including BLL and RYL! New puts got intraday reversals, but we are watching carefully to see if the run up has legs.

BONUS PLAYS:

WBST (Webster Financial--$33.03; +0.08; optionable): Banking.
http://biz.yahoo.com/p/w/wbst.html
STATUS: Broke out recently from a double bottom with handle pattern, and as it closed in on the left-side highs in a larger cup dating to October 34.15 (August high at 37.10) it has dipped back into handle to that larger pattern. Today it dropped to a low of 32.47 (18 day MVA at 32.33) before reversing, pulling back up to show a doji on lower, but continued strong volume of 324,300 (average 246,400). Looking for a breakout from the pattern. Good money flow. Target: 38.
BUY POINT: 33.55 on volume of 370,000. Stop: 31.50.
POSITION: Stock and/or April $30 calls to buy (SQT DF).

MARKET FAVORITES: All of the puts rallied back from intraday lows, but still face resistance that could push them back down after this bounce.

SEBL (Siebel Systems--$32.40; +1.91; optionable): Application software.
http://biz.yahoo.com/p/s/sebl.html
STATUS: After gapping up last week out of its recent consolidation, SEBL has come back to test the highs, although today it dipped all the way back to 32.63 (200 day at 31.73, with recent lows), but it rallied back with the market to close with a gain. A strong reversal, with volume up at 29.7 million (average 17.5 million), and it looks like it could give us a good bounce, at least over the next couple of sessions as the market makes a bit more of a surge here. Target: Short term move to 40 (recent high 38.38).
BUY POINT: In market strength, a move over 36 on continued strong volume. Stop: 33.57 (7%).
POSITION: Stock and/or March $32.50 calls to buy (SGQ CZ).

CHKP (Check Point--$32.88; -2.42; optionable): Security software.
http://biz.yahoo.com/p/c/chkp.html
STATUS: Took a very hard fall earlier this month, and held on in a loose consolidation for the last couple of weeks. It intersected its 10 day MVA (35.10) and then started down, and today took out the consolidation low (33.66) on a big spike in volume (13.6 million; average 8.72 million). Could not rebound with the market, only moving up slightly from its intraday low of 32.07. We could see a bit of a test back up toward the recent consolidation lows, but will look for a failure and then a continued drop back. Target: 28 initially.
BUY POINT: After a test back up toward 33.50-34, a drop back through 32.50 on continued strong volume.
POSITION: March $40 puts to buy (KEQ OH).

PRE-ANNOUNCEMENTS: RARE, GTK, TGH and STU are looking good.

LLL ($99.10; +1.87): No announcement but solid. We were looking for a breakout test, and with the market LLL went further than that, tapping near its 18 day MVA at its intraday low of 93.85. A good recovery, however, had LLL running hard back over the buy point and toward the breakout high (100.90). Volume was excellent at 1.12 million (average 505,300). Strong, and looking for more, and on a move over the high, stock and/or April $95 calls to buy (LLL DS).

EXPD ($59.67; +0.56): Working on a date. Looking interesting here. The breakout from a pennant early this month failed, but EXPD made a high low on the drop and has pulled back to the level of the breakout highs. It has tested the 18 day MVA (58.21) at its lows the last two sessions, and showed some volume on a move back up today (425,300; average 395,200). An ascending wedge, and we will look for the 18 day to continue to hold as we look for a breakout. The buy point is 60.90 on volume of 535,000, with stock and/or May $55 calls to buy (URP EK).

BRL ($73.15; +0.91): Hit down to 70.45 (buy point on the put was below 71.50), but moved back up with the market on lower, but decent volume of 874,000 (average 846,100). Looking for the 200 day (73.74, 50 day at 76.57) to offer trouble, and with a turn back down in the market we will look for weakness in BRL to continue it down. For new or additional positions, after a failed test of 74-75, a drop through 72.50 on continued strong volume, with March $65 puts to say (BRL OM).

DRI ($39.45; +2.27): We are working on a date. Nice breakout! Reported some good sales numbers and received an upgrade, and took off over the prior high 39.15 on very solid, sharply higher volume of 1.44 million (average 725,000). For current short-term positions on the bounce we will look at 40-41 as a possible target where it could pull back; with existing longer-term positions we need to use some care as this was the fourth bounce along the 18 day since its breakout, and we often do not get a fifth before a test lower (50 day at 35.52).

YUM ($54.30; +0.95): Forecast to announce a split on 2-6-02 after the market closes in conjunction with earnings. Continued its move up, almost hitting the buy point on the breakout from its double bottom with handle. Volume was what we want on a breakout move (1.34 million; average 767,000), and we will look for continued strength to carry the move. The buy point is 54.75 on continued strong volume, with stock and/or April $50 calls to buy (YUM DJ).

PRE-SPLITS: BLL continued to run, but we are wary. FRED could give us something in the last days before the split.

SONC ($37.20; +1.48): Splits 3:2 effective 2-9-02. SONC made the move, finally holding a run out of the pennant. A solid move, and the high (from the December breakout) is just ahead at 37.65. SONC is right at the level of recent highs that failed intraday, so this time we will see if it can continue the run. On a break to a new high, stock and/or March $35 calls to buy (ZXQ CG).

HOTT ($32.52; +0.88): Splits 3:2 effective February 6. Made the nice recovery Tuesday to hold the close over the 50 day MVA (31.64), and made the bounce today with lower, but continued strong volume (1.13 million; average 770,000). Going toward the split we will see if the bounce has legs, and the aggressive can jump on a move up from here, with the safer move on a run over the short-term MVA's (33.13), with stock and/or March $30 calls to buy (UHO CF).

MGAM ($37.00; +1.85): Splits 3:2 on February 12. Looked weak as the 50 day bounce looked like it was dying at the short-term MVA's (35.44), but today it gapped over that level and shot up with a spike in volume (195,300; average 164,300). Volume is not always the key element with pre-splits, but the stock was showing a descending wedge, and the strong volume on the gap up and move over the short-term down trendline shows strength. On a move over 37.60, stock only. The high is 39.99.

CONTINUING CANDIDATES: TGIC still trying to breakout, and RYL continued to march with another new high.

APPB ($36.45; +1.35): Was drifting up and not looking too healthy, but blasted up today in its little double bottom (from mid-December), taking out the middle (36.20) and making a new high intraday at 37. Volume was huge at 1.03 million (average 428,300), so we are looking for continued strong volume on a move over 37, with stock and/or May $35 calls to buy (AQB EG).

GNSS ($57.70; -0.31): Did not quite hit our buy point for a put at its low of 55.39, but the reversal to the upside was not the strong move we saw from many other stocks today. It could only manage a doji, and the weakness makes us keep looking for the downside play after tailing to hold a move at or over the 50 day MVA (60). From here, on a drop through 55, March $70 puts to buy (QFE ON). After a failed test of the 50 day, in a weak market we can look at a drop through 57 on continued strong volume, with March $70 puts to buy (QFE ON).

JCI ($83.27; +2.84): Made a pretty good recovery after dropping back to test near its 200 day MVA (74.57), but after pulling back a bit after encountering resistance at its high (82.70, from December), JCI stormed out to a new high today. Volume was high as the stock took out its November-December consolidation range on excellent volume (636,400; average 397,200). Still a buy up to 86.84 on continued strong volume, with stock and/or April $80 calls to buy (JCI DP).

DHR ($62.41; +0.85): Tested the 50 day at its low of 59.81, but surged back with the market to close with a gain and stay over the recent support of its short-term MVA's (10 day at 61.50). Volume was still good, though down at 1.35 million (average 1.05 million) and the stock is setting up nicely in an ascending wedge, making higher lows under its resistance at 64. There is some resistance from prior levels at 65-66, but we will look for that to be taken out on a strong breakout of the wedge pattern. The buy point is 64.35 on volume of 1.4 million, with stock and/or March $60 calls to buy (DHR CL).

POST-SPLITS: CHS is still testing the breakout.

VAR ($37.60; +0.67): Pulled back from a breakout move Tuesday but headed right back up today, and is showing strength on the breakout from the 'flying w' with handle pattern. Pulled back from 38 to close, but looking for the momentum to continue. There is resistance from prior highs at 38.25 and 38.63 ahead. A continued buy up from here on a strong move, 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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