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stock trading, stock share
Begin Part 2 of 3
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
2-04-02
Auto Sales, January (time not supplied): 6.0M versus 5.2M prior.
Truck Sales, January (time not supplied): 6.8M versus 7.8M prior.
2-05-02
ISM Services, January (10:00): 51.8 versus 54.2 prior.
Factory Orders, December (10:00): 1.0% versus -3.3% prior.
2-06-02
Productivity-Prel., Q4 (8:30): 3.0% versus 1.1% prior.
2-07-02
Initial Claims, 2/2 (8:30): 395K versus 390K prior.
Consumer Credit, December (15:00): $9.0B verusus $19.9B prior.
2-08-02
Wholesale Inventories, December (10:00): -0.5% versus -1.1% prior.
SUBSCRIBER QUESTIONS
Q: My question is regarding short interest in a stock. KKD has a huge short interest (I think around 20%). How do you look at this with respect to a stock? It seems like it would be a contrarian indicator with that many shorts to cover.
A: One of the indicators we keep an eye on in the market is the short interest on the NYSE and other indexes. Yes, it acts as a contrary indicator; when it gets to high or extreme levels it can be a signal of excessive fear in the market: a lot of investors are betting it is going to go lower. When it becomes the popular thing to do, the end is coming. The same can be used to a certain extent with short interest on an individual stock but it is not quite the same as on the market as a whole. It is not the entire market shorting in fear, but shorting just because it has made a run and they feel it cannot maintain the action. Always best to look at the price pattern and how the volume is moving with it. Is it showing accumulation or distribution? Since KKD first started trading and had a big run up, KKD has had more than its share of short interest. Many believe it is a cult stock and will run out of steam. Right now it is showing signs of wear and tear, trading below its 50 day MVA for the first time since September.
TEAM TRADES
Friday even as the indexes sold back there were some very fine upside plays. Not all of them held all of their gains on the session, but they were up on good volume. We closed out 4 upside and one downside position when the targets were hit and were entering new positions when the moves were made.
STEC: A small PC data storage hardware company, Simple Tech showed a big volume spike Thursday and looked ready to clear the recent high. Another small stock showing some outstanding buying action. Well, about a half hour into the session the stock hit our buy point (5.35) on massive volume (170% of average). Volume was heavy so we decided to go ahead and enter at that point. The stock shot up to 5.50 and missed our buy point, but we left it in; when you have a big run right off you usually get a test. Over the next hour and one-half it bounced between 5.36 and 5.50, but it slid back down to an ask of 5.35. At that point the fill came. The stock then rallied up the 15 minute MVA for the rest of the session, closing near 5.70 on a massive volume breakout of over one million shares.
TROW: Moving in a cup with handle pattern and in a sector we have been expecting to start to take more of a leadership role. The accounting woes have hurt some of the big names, and there was a bit of a trickle down effect. Still, TROW turned right back around after a tap down to the 50 day MVA Wednesday and rebounded well. Friday it made the breakout move, hitting our buy target of 37.75 right after 10:30 CT. Volume was fairly light, so we decided to take a partial position. It was a good spot to buy: the stock had moved to 37.60 and then pulled back over the next hour to 37.40 on very tight trading action. It then hit our buy point on a good pop upward. The stock was not moving real fast, but it passed our buy point and we put in an order at the current ask (37.80) and that was good enough. The stock continued to move higher throughout the session. It spiked up to 39.40 about a half hour before the close but fell right back down to 38.40 where it bounced. Volume was very good and we caught a few more shares at the close.
THE PLAYS:
Targets hit: NETA (at 30.25; 30% gain)
Good movers: ORI broke out again on strong volume, after testing the breakout from its ascending wedge.
Removed to a watchlist, but that doesn't mean we don't necessarily like the play anymore. We always make room for new stocks:
ORI: Still looks good as it broke out after testing the ascending wedge breakout. Riding aggressive positions taken at 29.50. ORI could form a handle before it takes out the previous basing highs at 32, for potential add-to or new positions. Target is 35.
CAKE: Popped higher Friday after hitting the aggressive buy point (35.15) Thursday, trying to take out the January high (37.75) but unable to hold the move to 37.85. Volume fell back and we expect a test of 36. This bounce from the 50 day MVA is going to take a breather here.
IOM: Trying to build up for another move over the 200 day MVA and met our aggressive buy point at 9.15. For the breakout, can look at taking positions over the moving average (at 9.60 Friday) for stock.
INVN: Broke out of the little cup with handle (buy point 39.50) but Friday pulled back again. Another handle can form since the stock is nearing the highs at the start of the cup (47) and pulled off its high at 44.27. Was a covered call play but the stock was in no mood for a pullback to that extent.
TROW ($38.74; +1.16): A nice three-day move up from the 50 day MVA, breaking out of the cup with handle Friday (buy point 37.75) and remaining a buy up to 39.64. Pulled off the high of 39.41; may pull back into another handle here. For a continued breakout from the base here, however, new positions from here for stock and/or April $35 calls to buy (RQW DG).
CASY: Sold back below the 18 day MVA on stronger volume. The move up from the 50 day MVA (our play) was short-lived. Do not like the fast turn back down. Won't let it fall below the 50 day MVA (14.30).
ULTE: Still at the 50 day MVA in the handle to the cup base. We are looking for a good recovery back over the 18 day MVA before considering playing it (buy point 32.44 on breakout).
ECL: Tested the short breakout move from the cup with handle, then rose for three days after a move back over the breakout high (hit buy point at 42.09). Friday's trading showed a tombstone doji so the stock can pullback, perhaps to the 42 range. Really needs to form a bigger handle (more extended pullback) for a good breakout from its bigger 13-month base.
GRTS: Can't settle down at the top of the right side of its 7-month cup base, though price/volume action was good until Thursday and Friday. Needs to form a decent handle, and while volume is trying to ease down in an orderly manner, price has yet to follow that example. Looking for a move over 32.50. 18 day MVA is at 21.82.
IRM: Unable to build on the earlier move. New positions over 32.50 to clear the stock of overhead supply stacked up since the January high.
SY: Testing the recent move off the 50 day MVA, but price/volume was off all week. Already hit the aggressive buy point of 18, but for new positions look for a move over the January high at 18.72 (4 days ago) for stock and/or March $15 calls.
BRLI: Hit the aggressive buy point (7) on rising volume Friday on a bounce from the 50 day MVA. The stock was in a cup with handle but sold too low in the handle. Looking for a move up from here, holding aggressive positions; breakout from the base is as 7.95.
STK: Made the 23.50 buy point on the ascending wedge breakout (Tuesday), and hit the 5% limit for buying on the move (Friday). Closed off the high on lower volume; resting after the good move.
FITB: Trying to move up on decreasing volume after a weak breakout from its double bottom. Hit the new aggressive buy point (63.86) Friday but is having trouble with 64 (tapped twice in 7 days) in addition to lower volume.
RJR: Started selling back on much stronger volume after looking ready to break out of the saucer with handle (buy point at 60.50). Will see if it holds the 18 day MVA (58.63).
VVTV: Started selling back from the 18 day MVA, closing just under the 50 day MVA. We were looking for a bounce from there, then breakout from the cup with handle.
MOGN: Never gave the strong move up and dropped to the 50 day MVA, out of the cup with handle (buy point was 17.15). Will see if it gets institutional support there.
Puts:
CELG: Back over the 18 day MVA and the down trendline. Hit 22.65 on Wednesday's low, but bounced back up from there. It is back now over resistance, so it if holds, time to close downside positions.
NDC: Back over the 50 day MVA Friday; the intraday high tapped the down trendline (October /January highs). Time to exit positions if the stock holds this support.
JEC: Sitting atop the 18 day MVA on low volume, below the 50/200 day MVA convergence just above (65). Still looking for a move below 62 (1-30 report) if it breaks support.
TMPW: Hit the 41.75 buy point on Tuesday, then dropped to our initial target at 35 on Friday before bouncing back on huge volume; accounting issues were in the news. Held with a doji below the earlier January low (38.20). May get a re-test of the low.
Best Plays:
1) DTC: Still a buy on this breakout.
2) MONE: Ready to bounce.
3) SMTC: Broke the 200 day MVA on rising volume (put).
4) ACDO: Still very tight in the pullback test.
5) GOSHA: Holding the ascending wedge.
6) CTAS: Tightening pattern.
7) TRI: Tight doji in the handle.
New:
FAST (Fastenal--$67.45; +0.54; optionable): Retail
http://biz.yahoo.com/p/f/fast.html
STATUS: In a 21-month base with a very recent 1-month reverse head and shoulders. Two weeks ago FAST bounced from the 50 day MVA and after testing resistance at the 68.50-68.70 range near three times in January. Friday the stock tested the resistance again but on low volume (137,400; avg. 228,000) closed with a tight doji just above its recent support, the 18 day MVA (66.64). Looking for a breakout over resistance and a target of 83.
BUY POINT: 68.80 on volume of 308,000 or higher. Stop: 63.98 (7%)
POSITION: May $60 calls to buy (FQA EL).
http://www.investmenthouse.com/ct/fast.html
ENER (Energy Conversn--$23.27; +3.93; optionable): Diversified Services
http://biz.yahoo.com/p/e/ener.html
STATUS: Made a strong breakout over the 200 day MVA Friday (22.48) after consolidating at the 50 day MVA near 20, no news on the huge volume move. ENER is in an 8-month base that is half as long as its larger one, and this is the first move back over the 200 day resistance since July. The big volume was up to 346,400 (avg. 67,000). We will look for a pullback after such a strong move to test the 200 day MVA (22.48) for new entry points, and are looking at an initial target at 28. Showing a big spike in money flow and good buying.
BUY POINT: Aggressive after a test of the 200 day MVA: 22.50 on rising volume. Stop: 20.93 (7%)
POSITION: Stock and/or March $20 calls to buy (EQI CD).
http://www.investmenthouse.com/ct/ener.html
SCS (Steelcase--$15.58; -0.13; optionable): Consumer Durables
http://biz.yahoo.com/p/s/scs.html
STATUS: A business equipment stock that is in a flying plateau type pattern at the top right side of 6-month base (part of a larger18-month base). The stock ran up late December/early January to peak at 15.90 and is consolidating over the last week in a pennant-type pullback to the 18 day MVA (15.42). Volume was falling off in an orderly manner up until Thursday when it spiked above average, but since it was an up day, that is okay. Friday it showed a tight doji above the support (176,200; avg. 135,318). We look for another strong move up and above the January high for a breakout. Money flow and buying strong. Initial target: 19
BUY POINT: 16 on volume of 183,000 or higher. Stop: 14.88 (7%)
POSITION: Stock and/or April $12.50 calls to buy (SCS DV; low open interests).
http://www.investmenthouse.com/ct/scs.html
Some small stocks:
PCLE (Pinnacle Systems--$9.05; -0.35; optionable): Consumer Durables
http://biz.yahoo.com/p/p/pcle.html
STATUS: In a 22-month base but since late April of 2001, PCLE is in a smaller 9-month cup with handle base, the upper right side of which was completed on a good breakout over the 200 day MVA back in December. The stock made it to the January high at 10.02 off an 18 day MVA bounce, and now is at the 10 day MVA after making a lower test nearly to its 50 day MVA. Friday PCLE pulled back on the first decent price/volume action all week (volume down to 232,600; avg. 453,000), so we are looking for a bounce back up. On that move, we are looking at a 13 target, level of the highs in the current base. Money flow is ahead of price, and buying looks good.
BUY POINT: 10.05 on volume of 455,000 or higher. Stop: 8.88 (7%)
POSITION: Stock and/or March $7.50 calls to buy (PUC CU).
http://www.investmenthouse.com/ct/pcle.html
DTC (Domtar--$10.75; +0.30; no options): Consumer Non-durables
http://biz.yahoo.com/p/d/dtc.html
STATUS: Broke out of an 8-month reverse head and shoulders pattern Friday on strong volume (113,800; avg. 63,000). The stock remains a buy on the move up to 11.34, after which we can look for a pullback (test) and move back up for additional positions. Tere is a chance the stock can pull back on the open Friday to test the buy point at 10.80 before heading up again. If so, aggressive positions from there. The pattern is part of a 2-year base with highs near 15. High money flow and relative strength. Target: 13
BUY POINT: A buy up to 11.34 on this move. Stop: 10.14 (7%) on buys at 10.90 after an early intraday pullback.
POSITION: Stock.
http://www.investmenthouse.com/ct/dtc.html
End Part 2 of 3
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stock trading
stock share
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