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us stock market, trend trading stock
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Weekend Newsletter for
September 16, 2007
Table Of Contents 1) MARKET SUMMARY 2) STOCK SPLIT PLAY 3) TECHNICAL PLAY 4) COVERED CALL PLAY |
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| | Stock Split Notices Investing Q & As Glossary |
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1) MARKET SUMMARY
> >From "The Daily" at InvestmentHouse.com
Market overcomes lender troubles, weaker retail sales, but that is about all it does.
- Market gets the mortgage and consumer jitters again but recovers.
- Retail sales not nearly as bad as they were made out to be.
- Fed is going to find a hard time pleasing all of the market all of the time.
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Market Summary (continued)
The market had some issues to deal with on Friday, the first being Northern Rock, the fourth-largest lender in the UK. It had to run to the queen, the Bank of England (BOE) for some emergency funding related to problems it is having with its mortgage investments. About twice a week a story arises with respect to mortgages, and the market needed the Northern Rock story in order to meet its quota for the week. In addition, US banks borrowed $7.2 billion from the Fed's discount window, the largest amount borrowed in a single day since the day following 9-11-01. That is what the Fed wants, i.e. to free up the credit market, but it also hiked concerns about the need to do so. The Fed just can't win. China was at it again, raising interest rates for the seventh time, finding it necessary to take action in addition to its recent increase in required reserves for its banks. There were some downgrades of some big names such as American Express and Intel, and the coup de grace was a disappointing retail sales number. Retail sales were not bad, they were just not as strong as many had hoped and some had prayed for.
The futures thumped lower and the market opened lower as well, but almost immediately it started to recover losses. There was realization that the retail sales were not actually that bad despite what the talking heads on the financial stations were spewing. Import prices were lower, indicating that there was no threat of inflation in the US. The Bernanke Fed did a good job of fighting inflation when it took over from Greenspan and his "feed the money supply, raise interest rates" approach to inflation control, but it appears to have lost sight of the fact that it actually won the battle. All of the numbers for 2007 show that inflation is under control. The core PCE annual rate has clocked in at 1.9% for the past two months, and over the prior six months is running at 1.5%. Energy is higher thanks to global growth in demand, and food is higher thanks to government folly with respect to ethanol, tying up all of our corn production in making expensive fuel versus feeding hungry people. But when you factor inflation you can't really count government folly and solid growth as inflation pressures. Indeed, as former Fed President McTeer has said, growth means lower inflation.
But, as usual, I digress. After that lower open the market turned back up and started to recover its losses. At 10 ET September preliminary Michigan sentiment statement was released, and it was both higher and better than expected (83.8 versus 83.5 expected and 83.4 prior). Industrial production was a bit lower than expected (0.2% versus 0.3% expected in 0.5% prior), but capacity utilization beat expectations, coming in at 82.2% (82.0% expected, 82.2% prior). That didn't really give the market its shot of B12, but it did bolster the action and keep stocks in recovery mode. It didn't hurt that oil was lower (79.10, -0.99) and after surging over 80 during the week. That put oil at a new all-time high in current dollars, but adjusted for inflation is still well below the near $100 per barrel mark set in the early 1980s.
Read "The Daily" Entire Weekend Summary
Here's a trade from "The Daily" and insights into our trading strategy:
Company Profile
EARNINGS: 10-30-07
STATUS: Cup w/handle. CF is working on a three week handle to its 10 week base that has formed after CF rallied to a new high following the June and July rally from a prior base breakout. Strong runner in the second half of 2006 and first half of 2007, and it needed a good base to consolidate the gains and set the stage for a new breakout and run. This base appears to be doing the job and we are going to be patient and let it show us the breakout move on nicely rising trade. It enjoys top flight earnings growth rates as well, and that combined with the pattern is what leads to solid gains.
Volume: 834.3K Avg Volume: 1.526M
BUY POINT: $65.05 Volume=2.3M Target=$77.95 Stop=$61.77
POSITION: CF AM - Jan. $65c (49 delta) &/or Stock
Learn more about "The Daily" with Stock Picks! - Issued 5 Times Per Week
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** SCOTTRADE **
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2) Stock Splits Playing stock splits can be very profitable, but it takes know-how. Our stock split service focuses on three main types of plays: 1) pre-announcement (where we forecast an upcoming split prior to the company making the announcement); 2) pre-split (these plays are made in the days leading up to the actual split day); and 3) post-split plays (plays made after the actual stock split where the stock is showing continued or renewed strength).
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For post-splits, we can play them as we would pre-splits (very short term), but we prefer to stretch our horizons, playing the trend. When playing options, we look further out, 2 or more months at least. We let the trend carry us along if there is one, but we will also take profits if the technical pattern degenerates, e.g., breaks a trendline. The main difference between post-splits and pre-splits plays is that we really have to like the pattern. Pre-splits can run right before their splits even with poor technical indicators. For post-splits, we are looking at the stocks from more of a longer term "would I buy this stock at this juncture?" position. Now there are times when a hot stock splits and investors pile in to get in while the stock is 'cheaper.' We play those, but with more of a short-term, pre-splits mentality in that we will be ready to get out fast if the momentum fades.
Remember, everything we do has to pass muster with the market that day ... don't fight the market on these plays.
Listen to Stock Split Report Editor Jon Johnson's
stock split interview on CNBC-TV [ Broadband | Dial-up ]
Here's a post-split play and our current analysis.
Company Profile
EARNINGS: 10-18-07
STATUS: Ascending base. SJR made a higher low at the 50 day EMA (22.64) to start the week and rebounded nicely to close it out. No massive volume surge to end the week on that move, but solid price gains and money flow is racing ahead of price, paving the way for the break higher and a run to a new all-time high. Showing excellent strength and we are willing to move in on this break higher even moving into the FOMC meeting.
Volume: 322.7K Avg Volume: 452.248K
BUY POINT: $24.38 Volume=650K Target=$28.95 Stop=$23.04
POSITION: - Stock (no option chain)
Learn more about our Stock Split Report and how we have made gains of 321% with our powerful stock split plays!
Details Here. |
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3) TECHNICAL PLAY Company Profile
EARNINGS: 10-22-07
STATUS: Cup w/handle. When stocks recovered from the selling the reverse head and shoulders was a common pattern. After breaking higher the stocks have formed the current type of base, setting up the next stage of breakout and run higher. CNH rallied up to form the right side of its 10 week base, and now it is moving laterally on very low trade, shaking out the weaker holders and setting up the breakout move. These kind of patterns are well-positioned for the Fed announcement: if they get the news they want they breakout and we move in. If they don't we wait and see if they deliver the breakout at another time. Another stock with top-flight earnings growth rates to go with the pattern and tied to the global economy as well.
Volume: 227.7K Avg Volume: 403.158K
BUY POINT: $55.05 Volume=605K Target=$65.95 Stop=$52.11
POSITION: CNH LH - Dec. $55c (54 delta) &/or Stock
Learn more about our Technical Traders Report - Issued 5 Times Per Week |
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4) COVERED CALL PLAY Company Profile
Learn more about our Covered Call Tables - 8 Tables Updated 5 Times Per Week |
PREMIUM SERVICES
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Stock Split Report: Forbes.com Best of the Web
Covered Calls: 8 Tables with nightly updates - energize your portfolio!
Tech Traders: Breakouts, wedges, etc...focusing on stocks ready to move now!
The Daily: "The Daily" is a must read for all investors!
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The foregoing is commentary for informational purposes only. All statements and expressions are the opinions of Online Investment Services, LP., or Split Ventures, Ltd. This information is 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 the related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolios of writers for this issue may, in some instances, include securities mentioned herein and on the related 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. No one associated herewith receives compensation in any manner from any of the companies that are discussed in this newsletter or on the related websites.
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