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SUBSCRIBER QUESTIONS

Q: What is meant by "Double Bottom Recession Ahead"?

A: A double bottom recession is where the economy picks up and then drops back down again before climbing out one last time to recovery. This frequently happens and is something that Greenspan is worried about and knows could happen. That is why he said no stimulus package was needed now but could be needed; if the economy drops back down he is concerned that the consumer will shut down and not pull the economy out. The irony is sad. The consumer was 'runaway' before, yet during the recession it 'kept the economy afloat' with those runaway spending habits. Now Greenspan has pinned his hopes on the consumer to keep on consuming and save the economy. Congress has as well; it certainly is not going to try and stimulate capital investment.

Now many times a double bottom recession is an illusion based on the screwy way the government maintains its records. For instance, inventories are included in GDP calculations and thus when they are big, GDP is stronger. If economic activity is increasing, inventories will fall as goods are used up; GDP falls as well. Thus we can see economic activity pick up a bit and knock inventories way down but GDP is still lower because of low inventories. The cycle is like this: high inventories with some economic activity gives a bump in GDP higher. Then inventories are worked off because of that demand reducing them, but businesses are not too eager to pump inventories back up; they let them fall. Economic activity remains the same, but inventories are down, and thus lower GDP. Looks like a double dip recession, but it is not. Problem: consumer perception. If they perceive a slowdown they may pull back once again. That is why it is important to give stimulus; add that insurance on a bit. It can always be pulled back.

TEAM TRADES

ACDO: On the TTR, this is one stock that bolted out of an ascending wedge in December, and had tested that move. It has had some power behind it, and we were ready to jump on board again when it showed itself. Well, it was massing for an attack on a very tight range and very low volume on the 18 day MVA. Monday saw volume jump on a small price movement. Today it was ready to fly and we were watching. In the first half hour it hit our buy point (52.25), clearing the mid-January tops. That was our point of entry; with the tight, low volume pullback and Monday's volume spike, we were ready to enter when it showed its hand. We issued the alert and then set about getting into this one. After tapping 52.50 it pulled back and traded right at the breakout point for about 20 minutes. After it pulled back and was holding steady, we entered an order right at our buy point (a bit ahead of the current ask; we were going to let it move on up again and take us with it). After about 10 minutes we saw the trade go buy just as planned. The stock was steady, then about 45 minutes later spiked to 54. Happy, but then it tested the move. Volume was good, the test held and then the stock ran up almost to 56 with 2 hours left. It could not hold, however, on the stimulus news, but it found support at 54.50 and moved laterally for the rest of the session to close near 55. Huge volume, nice gain, great stock.

THE PLAYS:

Good movers: SYK, FAST, ACDO, JPM, (put).

Targets hit today: OEX (552), JPM (29, initial)
Stop Advisories: OEX (557), VARI (33.50), DSTM (6.50), VIP (27.68), PRSF (1.98).
Trailing stop advisories (to help preserve gains): NBIX (42), IRM (31), SCSC (51), MANU (16), LTD (17), MRVL (37.50).

Puts: ITMN tested the 200 day MVA, then broke above it. We were looking for the kiss good-bye, but now the stock may test the 42.50 range instead. From there it will have to break the 200 day MVA again. CELG hit the buy point but reversed and move up to close just below its 10 day MVA (slightly higher volume on the move).

Continued plays that look solid. Please see the Monday night report for more details:
CTAS ($49.88; +0.84): Back over the 18 day MVA in the ascending wedge.
DLTR ($31.65; +0.12): A tight doji after Monday's low-volume drop to the 18 day MVA, where it closed today. Looking for a move back up and breakout over the January high.
TRI ($31.90; +0.52): Made a move up from the base of its handle (cup base) on rising volume, taking out the aggressive buy point by moving over 32. It pulled back below that level. Look for a move over 32.50 (intraday high) for taking aggressive positions from here.
USAI ($28.65; -0.16): Still looks good in the test of the breakout, as volume slips lower again.
AZPN ($18.49; +0.04): Held the 18 day MVA after Monday's selling bout. Volume fell nicely below average, so looks like the stock is going to do what we want for now (holding the support).

GOSHA (OshKosh B'gosh--$41.78; +0.81; no options): Kid's clothes
http://biz.yahoo.com/p/g/gosha.html
STATUS: Would like to see this nice-looking pattern explode. The stock trades on less than 100,000 average daily volume (we typically prefer over that) but like the pattern and some retail stocks have upside potential, including this one. Volume shot up Monday but was higher again Tuesday (72,900; avg. 45,000) with the stock making the move higher. Looks ready to make the move, with money flow and relative strength moving out ahead of price. Target: 52
BUY POINT: 43.10 on continued strong volume. Stop: 40.08 (7%)
POSITION: Stock.

http://www.investmenthouse.com/ct/gosha.html

New upside:

PSUN (Pacific Sunwear--$21.68; +0.33; optionable): Retail
http://biz.yahoo.com/p/p/psun.html
STATUS: In the bottom of an 11-month base PSUN completed a 6-month cup with most of it below the 200 day MVA. The crucial move was made, though and now the stock is testing the 50 day MVA just above that breakout point. The test of the 50 day MVA came after PSUN tried to form an ascending wedge above support of the 10 day MVA right after it broke over the 200 day MVA, but the pattern fell out Monday on a drop through both the 10 and 18 day MVAs. Volume was low, however, so the selling was mild, and Tuesday the stock got some buying support, evidenced by the good bounce from the 50 day. Volume was up to 946,400 (avg. 802,000). Looking for a continued bounce for a move over the 18 day MVA. Target: 28. Good money flow.
BUY POINT: Aggressive: 22.15 on volume in the range of 1 million. Stop: 20.60 (7%)
POSITION: Stock and/or March $17.50 or $20 calls to buy (PVQ CW or CD).

http://www.investmenthouse.com/ct/psun.html

IFF (Internat Flavors & Frag--$32.15; +1.20; optionable): Specialty Chemicals (perfume)
http://biz.yahoo.com/p/i/iff.html
STATUS: Breaking out of a large ascending wedge (just over 5 months long) on strong volume. The stock took a breather Monday after making a couple of moves up in recent days on decreasing volume. It needed a dose of strong volume, and at 1.03 million (avg. 33,5227), that is just what it got. Remains a buy on the breakout up to 33.38. Money flow on the rise, and relative strength is breaking out. Target: 39
BUY POINT: 32.20 on continued strong volume. A buy up to 33.38. Stop: 29.95 (7%)
POSITION: Stock and/or March or May $30 calls to buy (IFF CF or EF).

http://www.investmenthouse.com/ct/iff.html

Back On: TROW, previously covered, is pulling back in another handle on lower volume. Will look at a new buy point at 39.51 for stock and/or April $30 calls to buy.

http://www.investmenthouse.com/ct/trow.html

GRTS (Gart Sports--$24.03; +1.28; no options): Specialty Retail
http://biz.yahoo.com/p/g/grts.html
STATUS: Broke out of the ascending wedge pattern noted in last night's report. Buy point was 23.60, so the stock remains a buy on this move. Volume was up to 84,900 (avg. 49,000), no news. The wedge formed at the upper right side of the stock's 7-month cup base (with a double bottom at the lows). Cleared the prior basing highs on the breakout. We can look at taking new or additional positions on a test, expecting support at 23.60 or higher. Showing excellent money flow and buying, in addition to high relative strength. Target: 28.30
BUY POINT: A buy on this move up to 24.80.
POSITION: Stock.

http://www.investmenthouse.com/ct/grts.html

STK (Storage Tech--$24.84; +0.60; optionable): Hardware
http://biz.yahoo.com/p/s/stk.html
STATUS: Tested the breakout from its ascending wedge as noted on last night's report. After a 2-day pullback STK opened with a test near the 10 day MVA Tuesday and then started moving up on strong volume (1.08 million; avg. 728,000), closing just a cent under the intraday high. A move with potential for follow-through here. Showing strong money flow and high relative strength. Target is 29.
BUY POINT: 25.05 (breakout high is 24.99) on continued strong volume. Stop: 23.30 (7%)
POSITION: Stock and/or March $22.50 calls to buy (STK CX).

http://www.investmenthouse.com/ct/stk.html

Put:

MMM (Minnesota Mining & Mfg--$108.68; -0.82; optionable): Conglomerates
http://biz.yahoo.com/p/m/mmm.html
STATUS: Still weak. After hitting 100 (original put target) over two weeks ago, MMM recovered back over the 50 day MVA but moved back below the 18 day MVA Monday. On rising volume Tuesday it again headed lower though the move wasn't as big. The low of 108.10 tested some possible support at the 108 range; if that holds it up in a market attempt at a rally, MMM can move back up for another test of the 18 day MVA (110.59) or even the 50 day MVA (112, which is just about at the level of the short term down trendline). From there, on the 'kiss good-bye' we can look at taking aggressive positions for a potential drop to 105 for an initial target and once there, assess the potential for a move down to 100. Volume up to 2.36 million (avg. 2 million).
BUY POINT: Aggressive from the 18 day MVA: 110 on rising volume, after a move up to test the 18 day MVA at 110.59.
POSITION: March $120 (MMM OD) or May $125 (MMM PE) puts to buy.

http://www.investmenthouse.com/ct/mmm.html

For a review of frequently asked questions, please use the link below:

http://www.investmenthouse.com/1questions.htm

Good Investing!
Jon L. Johnson and the Technical Traders 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 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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