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Begin Part 2 of 2
THE PLAYS: We have continuing food, drug, drink and defensive plays. We
are not too wild about their prospects right now. Be ready to take
profits on existing positions and if you want to play them, make sure they
make the moves needed.
All prices reflect prices at the close on Monday
SOME LEADERS TO WATCH:
AMCC (Applied Micro Circuits--$74.75; +11.00; optionable (AZV)):
Electronics: Semiconductor, Integrated Circuits
STATUS: Hit its short term up trendline on the intraday low of 55.81,
then took off to break over all its moving averages (200 day is at 69.02)
to close just under its down trendline. That line connects the October
and December highs, and the stock tapped that resistance on the intraday
high (75.50). The stock can see a pullback due either to profit-taking or
just a natural pullback as aftermath to the strong move; if so, look for
support at 70 (or better). From there look for a move back up as the
market continues to rally.
BUY POINT: On a move back up after pulling back to the 70 level.
POSITION: Stock and/or February $70 calls to buy (AZV BN).
EMLX (Emulex Corp--$81.00; +17.69; optionable (UEL)): Computer Hardware:
Peripherals
STATUS: Surged from below the up trendline (the stock gapped down on the
opening price of 61) and on stronger, above average volume (9 million;
avg. 7 million) shot back over its 50 day and short term moving averages.
Price closed at the 81-82 resistance, but we love this move through all
the overhead supply up to that level. This one looks ready to offer more,
as volume is just getting started. On profit-taking or on a natural
pullback after Wednesday's strong action, look for the 10 and 18 day MVAs
for support (75.74 and 74.87, respectively). EMLX reached a closing high
of 89.96 in December.
BUY POINT: Aggressive: On further upward movement on continued rising
volume, or, from the 75 range on similar volume.
POSITION: Aggressive: Stock and/or February $80 calls to buy (UEL BP).
From 75, stock and/or April $75 calls to buy (UEL DO).
Best Plays:
1) FITB: Has tested and looks ready to move to a new high.
2) MMM: Looks ready to move up from this doji.
3) ORCL: A tech stock that had a great day on the rate cut.
4) MEL: A strong move off its up trendline.
5) MIL: Ready to break out of the handle.
6) KEI: Good price/volume action readying the stock for a move up to the
50 day MVA.
7) EDS: A breakout move on a break of its down trendline.
8) MER: A buy on a pullback; ready to break out of its base.
9) CYTC: A breakout move.
10) AREM: Ready to run to its January 9 split.
11) JPM: Broke its 200 day MVA on strong volume; a buy on a pullback.
READY TO BREAK TO A NEW HIGH:
A New Play:
FITB (Fifth Third Bancorp--$59.69; +2.47; optionable (FTQ)): Regional Bank
(Midwest)
http://biz.yahoo.com/p/f/fitb.html
STATUS: After correcting to a November low of 43.31, the stock ran to a
December high of 60.88, then pulled back to the 18 day MVA (57.57)
Tuesday. Launched from that support on strong volume (3.8 million; avg.
1.9 million) in what looks like a successful test of the October highs and
a December conoslidation at the 57 level.
BUY POINT: Over 61, on continued strong volume.
POSITION: Stock and/or February $60 calls to buy (FTQ BL).
TESTS OF THE BREAKOUT: Some of these stocks are moving back on low volume
to test the breakout. Some of them have already tested and moved to
higher ground, but have pulled back from those new highs. We have noted
those. On the stocks that are now pulling back to test, we often take
profits on option plays when they start to pullback on the breakout move
and then get back in when the stock bounces up off of the breakout point.
Continued Plays:
MOND (Robert G. Mondavi--$53.06; -1.44; no options): Food and beverage
http://biz.yahoo.com/p/m/mond.html
STATUS: Pulling back from the pennant breakout, and volume, while lower,
remains solidly strong and above average (170,400; avg. 64,000). Still
above the buy point of 52.63, but the stock is likely to pull back to the
10 day MVA at 52.16 before heading back up after this test. And, with the
techs roaring, some defensive stocks will not do as well as they have
been.
BUY POINT: On a move up from the 52 range on strong volume, after a
continued pullback to that level.
POSITION: Stock.
AVE (Aventis--$79.19; -5.12; optionable (AVE)): Drug
http://biz.yahoo.com/p/a/ave.html
STATUS: Dropped to the 18 day MVA to close as the techs rallied. Volume
dropped back to remain above average at 221,500 (avg. 155,000). The stock
has now dropped just below the buy point of 80.07, but can bounce back
from here. In a continued tech rally, how far it can bounce (quickly)
remains to be seen. The 10 day MVA is at 80.53.
BUY POINT: On a bounce back over 81 on stronger volume.
POSITION: Stock and/or April $75 calls to buy (AVE DO).
PFGC (Performance Food Group--$48.81; +1.31; no options): Food Wholesale
http://biz.yahoo.com/p/p/pfgc.html
STATUS: Floundering after pulling back from a successful breakout test.
Dropped below the 18 day MVA (49.19) after pulling back from the December
closing high of 56.75, and couldn't muster the strength to hold at the
high of 50.63, which moved price back over the 10 day MVA at 50.15.
Volume remains below average at 149,200 (avg. 150,000). We will look at
new positions on a strong move back over the intraday high (50.63) on
above average volume. Buying dropped off.
BUY POINT: Over 51 on strong volume.
POSITION: Stock.
MRCY (Mercury Computer Systems--$44.25; +3.25; optionable (QYR)): Telecom
equipment
http://biz.yahoo.com/p/m/mrcy.html
STATUS: Holding at the 10 day MVA on a move up from the 41 range on
strong volume (576,700). The stock reached a December closing high at 50
on a breakout test, and is attempting to make it back up after a three-day
pullback to below the 18 day MVA (42.63) on above average volume. Look
for a hold at this support level for a move back up in a continued market
rally.
BUY POINT: Aggressive: On a move up from here on continued strong
volume.
POSITION: Stock and/or February $40 calls to buy (QYR BH).
MAPS (Mapinfo Corp--$40.94; +0.44; no options): Computer software
http://biz.yahoo.com/p/m/maps.html
STATUS: Floundering after pulling back from its successful test of the
breakout. Holding at apparent support (40) after dropping back from the
closing high reached after the stock tested the December breakout, but we
aren't taking positions unless the stock breaks back over the 10 day MVA
at 43.74. Volume was quite strong (518,000, twice average) but unable to
hold the stock at the high of 44.25.
BUY POINT: On a move over 45 on strong volume.
POSITION: Stock.
MMM (Minnesota Mining & Mfg--$117.81; -1.38; optionable (MMM)):
Conglomerates
http://biz.yahoo.com/p/m/mmm.html
STATUS: Still looks good, pulling back to a tight doji above support (10
day MVA at 117.08), and remains as well above the December breakout
closing high of 116.63 (which the stock successfully tested). After a
three-day pullback, the doji signals a turn back up. Look for that on
stronger volume; MMM hit a December high of 122.94 twice the last two days
of the trading year (resistance). Strong money flow.
BUY POINT: Up from here on stronger volume. Reached 2.3 million shares
Wednesday; average is 2 million.
POSITION: Stock and/or April $115 calls to buy (MMM DC).
BMET (Biomet Inc--$39.75; +0.37; optionable (BIQ)): Health services
http://biz.yahoo.com/p/b/bmet.html
STATUS: Hasn't made it back over the buy point of 40.01 (BMET broke out
of a trading range last week), but is holding above the 10 day MVA (39.18)
and other price support just above 39. The stock tested the 50 day MVA on
the low of 37.69, so we like this recovery back over support. Look for a
move back up and over the breakout high of 41.75 as volume continues to
build from Wednesday's higher levels (broke well above average to 2
million). A sturdy stock, but a bit shaky here.
BUY POINT: Aggressive: From here on continued rising volume.
POSITION: Aggressive: Stock and/or April $35 calls to buy (BIQ DH).
BOUNCE PLAYS: These plays are fast plays after a pullback to support.
Continued Play:
CB (Chubb Corp--$82.31; -1.13; optionable (CB)): Insurance
http://biz.yahoo.com/p/c/cb.html
STATUS: CB is ranging up and down off its up trendline (connects June,
October and November lows) and broke the 50 day MVA (82.70) on average
volume (851,600; up from Tuesday). The stock can continue to the
trendline at 80.50 for the bounce back up. Money flow remains high and
buying just positive.
BUY POINT: Aggressive: On a bounce from the 81 level (trendline), on
above average volume.
POSITION: Stock and/or April $75 calls to buy (CB DO).
WEDGES, PENNANTS, and FLYING PLATEAUS (AND FLAGS): These are some of our
favorite patterns as the moves can be explosive. In this market, however,
we need to see the move on the breakout on strong volume.
Wedges:
New Play (from the weekend):
IVGN (Invitrogen Corporation--$75.00; -6.06; optionable (IUV)):
http://biz.yahoo.com/p/i/ivgn.html
STATUS: Sold back to a low of 68.44, but fought back to close on the 50
day MVA (volume was twice average at 2.3 million). On a move up on the
momentum, the stock can hang onto its ascending wedge pattern (which we
consider it to be holding still), but it is a fight right now.
BUY POINT: Aggressive: On a bounce from here on continued strong volume.
Watch the 18 day MVA at 77.36, resistance that is buttressed by several
December prices at that level.
POSITION: Stock and/or February $70 or $75 calls to buy (IUV BN or BO).
Continued Plays:
ORCL (Oracle Corporation--$32.00; +5.62; optionable (ORQ)): Software
http://biz.yahoo.com/p/o/orcl.html
STATUS: Wednesday's rate cut sent the techs flying, and ORCL enjoyed its
strong move back into the range of its ascending wedge pattern (back over
the 50 day MVA, which the stock broke Friday, at 30.13). The stock hit 32
one other time in the pattern, but looks ready to take out the former
pattern high of 33.13 after clearing most of the lower prices in the
pattern. May see a natural pullback after the strong move (or some
profit-taking), but look support at the 50 day.
BUY POINT: Breakout: 33.13, on continued strong volume.
POSITION: Breakout: Stock and/or February or March $30 calls to buy (ORQ
BF or CF).
MEL (Mellon Financial Corp--$50.38; +2.07; optionable (MEL)): Banking
http://biz.yahoo.com/p/m/mel.html
STATUS: Bounced back from its up trendline (connecting October and
November lows) on strong volume, as the financial stocks rallied on the
rate cut. Had dropped from the shorter-term wedge we were looking at, but
this move puts the stock close to the breakout point of 52.07. On early
weakness before the market continues to rally, look for support at the 10
day MVA (49.77). Volume was strong and above average at 2.5 million (avg.
1.8 million).
BUY POINT: Breakout: 52.07, on continued rising volume.
POSITION: Aggressive: Stock and/or March $50 calls to buy (MEL CJ).
Pennant:
New Play (from the weekend):
TMO (Thermo Electron Corp--$28.69; -0.31; optionable (TMO)): Conglomerates
http://biz.yahoo.com/p/t/tmo.html
STATUS: Dropped from the pennant pattern proper (that we were looking
at), but closed on the 50 day MVA on lower volume (1.1 million; avg.
949,000). The stock tapped its up trendline (connects August and October
lows) on the low of 27.89 before moving back above the support of the
moving average. That is a bullish move, and we look for a move up from
here in a sector rally. Continued high money flow and good buying.
BUY POINT: Back in to the range of the former pennant (over 30), on
rising volume.
POSITION: Stock and/or March $30 calls to buy (TMO CF).
Continued Plays:
CGP (Coastal Corp--$82.31; -3.94; optionable (CPG)): Energy: Pipelines
http://biz.yahoo.com/p/c/cgp.html
STATUS: Has pulled back hard from its breakout high of 90.88, losing the
entire breakout move and closing back in the range of its handle
consolidation. Volume was big on the selling as money rotated out of the
energy sector in Wednesday's rally, coming in at 1.91 million (average
991,000). We will see if the stock can hold, with the 50 day MVA below at
79.58. No new positions.
BASING/TRADING RANGES:
New Plays:
A rolling pattern:
NPSP (Nps Pharmaceuticals Inc--$42.25; +2.19; optionable (QKK)):
Biotechnology
http://biz.yahoo.com/p/n/npsp.html
STATUS: Rolling between 37 and 49, the stock started to roll up in its
pattern today, but could not hold a move back over its 50 day MVA (42.90),
pulling back from a high of 45.50. After three to four rolls the pattern
either breaks down or breaks out. Looking for a momentum move up from
here, for a possible breakout from the pattern.
BUY POINT: Aggressive: On a move over the 50 day on continued strong
volume (531,400 today; average 280,300).
POSITION: Stock and/or February $40 calls to buy (QKK BH).
MIL (Millipore Corp--$62.00; +2.19; optionable (MIL)): Electronics
(scientific and technical instruments)
http://biz.yahoo.com/p/m/mil.html
STATUS: Made a strong move up in the handle of its cup base, rallying on
the Fed news after having dipped down as far as 54.94. Back near the
breakout point, and we will look for a continued move over that level with
more good volume, which was in today at 1.14 million (average 540,600).
Good buying, and rising money flow and relative strength.
BUY POINT: Over 64.19, on continued strong volume.
POSITION: Stock. April $60 options had insufficient open interests.
KEI (Keithley Instruments Inc--$44.00; +7.56; optionable (KEI)):
Electronics (scientific and technical instruments)
http://biz.yahoo.com/p/k/kei.html
STATUS: Took advantage of the rally, turning back up after Tuesday's drop
and managing to close back over its down trendline (connecting
October-December closing highs). The stock is trying to work its way up in
the right side of a double-bottom, and the trendline is where the stock
was turned back at the pattern "center," which is at 51.25. With some
profit-taking look for the stock to hold at the trendline, which is at 40,
for a continued run. The 50 day and 200 day MVA's are resistance at 47.26
and 51.51, respectively.
BUY POINT: On a move up after a morning pullback to the 40 range. Look
for continued strong volume (9.7 million today; average 518,600).
POSITION: Stock. February and April options below the $60 strike have
insufficient open interests for the stock.
EDS (Electronic Data Systems--$59.25; +3.50; optionable (EDS)): Software
(information technology)
http://biz.yahoo.com/p/e/eds.html
STATUS: Blasted up in its handle (to its 8-month base), closing just
under our buy point. Volume was what we wanted, fueled by the rally and
coming in at 3.62 million (average 2.27 million). Still looking for a
breakout of the pattern, and we could get it in this rally. The stock
shows a high relative strength and money flow. Broke its down trendline
on strong volume, a bullish move.
BUY POINT: 60.13, on continued strong volume.
POSITION: Stock and/or March $55 calls to buy (EDS CK).
Continued Plays:
MER (Merrill Lynch & Co--$73.44; +7.69; optionable (MER)): Brokerage
http://biz.yahoo.com/p/m/mer.html
STATUS: A tremendous day for financials, rallying on the news of the rate
cut. MER shot all the way up to the top of its recent rolling range,
making a new closing high. As you would expect, volume shot way up to 10.7
million (average 4.4 million). After such a great move we expect more, but
a great move can also lead to a bit of profit-taking, with support on the
pullback back in the range of 68. On a move back up we can jump in. The
all-time high is at 74.63.
BUY POINT: A move up after a morning pullback.
POSITION: Stock and/or April $65 calls to buy (MER DM).
SFNT (Safenet Inc--$44.38; +0.75; no options): Software
http://biz.yahoo.com/p/s/sfnt.html
STATUS: After having dropped out of what had been shaping up as a handle
to its double-bottom pattern, including a gap-down today, SFNT managed a
move back up. The stock closed at its 18 day MVA, and is just below the
center of what had been the double bottom (at 46.63), with the recent high
at 50. Unlike many of the tech stocks that took advantage of today's rate
cut rally, SFNT moved on lower, below average volume of 39,700 (average
86,000). High money flow, relative strength, and good buying.
BUY POINT: Aggressive: A continued move in a rally, with volume in the
60,000 range.
POSITION: Stock.
CYTC (Cytyc Corporation--$65.00; +6.69; optionable (YQK)): Electronics
(scientific/technical instruments)
http://biz.yahoo.com/p/c/cytc.html
STATUS: Blasted back up from the range of its 50 day MVA (56.75) after
having fallen out of its ascending wedge handle the last two sessions,
closing back up near its breakout high of 66.75. Today's move was on
strong volume of 914,800 (versus the average of 674,600). On a pullback
the stock could catch support anywhere back toward 60, and the aggressive
can play a move back up in a continuation of a rally.
BUY POINT: Pullback A move up after a pullback to the 60 range. Breakout
Over 66.75.
POSITION: Pullback Stock and/or February $55 calls to buy (YQK BK).
Breakout Stock and/or February $60 calls to buy (YQK BL).
AREM (Aremissoft Corporation--$42.69; -0.75; optionable (UKM)): Software
http://biz.yahoo.com/p/a/arem.html
STATUS: The stock had fallen out of a rolling pattern between 35 and 50
Tuesday, but blasted back up in today's rally. Support on profit-taking is
just below at the stock 50 day MVA (40.65; also the 18 day at 41.80).
Looking for a move at least back up to the highs in the rolling range,
around 50.
BUY POINT:
POSITION: Positions with stock (insufficient open interest on options).
JPM (J.P. Morgan & Co--$50.63; +6.63; optionable (JPM)): Banking
http://biz.yahoo.com/p/j/jpm.html
STATUS: A great day for financials. JPM had pulled back to its 50 day MVA
(43.14), but with a strong move today it bounced up and broke out of its
double bottom pattern. Volume was, of course, big at 21.3 million (average
8 million). On profit taking on lower volume, look for support to hold at
the breakout point, at 47.56 for a move back up.
BUY POINT: A move up after a lower volume pullback to the 200 day MVA.
POSITION: Stock and/or March $45 calls to buy (JPM CI).
BEC (Beckman Coulter Inc--$40.19; -1.62; optionable (BEC)): Electronics
(scientific/technical instruments)
http://biz.yahoo.com/p/b/bec.html
STATUS: After hitting our buy point (42.01, the stock's high was 43), BEC
pulled back hard in the handle of its cup base, closing back on the 18 day
MVA, which has been consistent support in the latter portion of the
pattern. We will see if it can hold here, but volume was up on the drop,
at 404,500 (average 203,000). No positions from here; we will see how it
shakes out, still for now looking for a move back out of the handle.
BUY POINT: 42.07, on volume of 503,000 or better.
POSITION: Stock (insufficient open interest for options).
PLT (Plantronics Inc--$51.19; +8.63; optionable (PLT)): Telecom
http://biz.yahoo.com/p/p/plt.html
STATUS: Had dropped hard back to the bottom of the handle to its double
bottom base, but blasted back up in today's rally. The stock erased the
losses of the preceding two sessions, closing back near the breakout level
in the handle (52.13). Volume was up, as was the norm for Wednesday, at
522,600 (average 321,800). Before the breakout we could get some profit
taking after today's great move, with support in the 48 range from the
center of the double bottom pattern.
BUY POINT: Aggressive: A move up after a lower volume pullback to the 48
range. Breakout: 52.13, on continued strong volume.
POSITION: Stock. February $45 and $50 options (PLT B-) have insufficient
open interests.
Good Investing!
Your Technical Traders Report Team
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 in 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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