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us stock market, trend trading stock
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INVESTMENT HOUSE.COMTM |
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Informing Investors Around The World |
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Weekend Newsletter for
September 30, 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
Good economic data cannot fight off the end of quarter profit taking.
- Market closes out the week modestly lower.
- Core inflation continues to fade while Chicago PMI rises, construction rises.
- Looking for some new money to enter to start the week.
- Market looking for a breakout but has the jobs report ahead of it.
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Market Summary (continued)
There was plenty of economic data Friday morning, and the actual data was just fine. It was the prattle about recession that rattled futures. Greenspan reiterated its comments regarding the recession probability being a bit higher than the one-third he assigned to it a few months back. GS issued a report predicting recession. Okay. There is plenty of gloom.
As for the real data, incomes were a bit lower than expected, spending was a bit more than expected, and the core annual PCE inflation reading fell to 1.8%, a 3.5 year low. That was enough to rebound futures some, but they only made it up toward flat by the open. Nonetheless the market jumped higher to start the session. A half hour into the trade the Chicago PMI came out higher than expected and Michigan sentiment held steady. Still looked good.
The market did not react positively, however. After the move higher into quarter end on some low trade, the sellers moved in for some profit taking. That pushed the indices negative to end the first hour. After that, a steady climb higher through the early afternoon session. Nice steady comeback with energy trying to lead as it did early in the session. Then good old St. Louis Fed president Poole suggested that the market would be making a mistake if it bet on another rate cut. That harpooned the recovery, sending the major indices lower back into negative territory. A late rebound improved the picture, but could not push the indices positive.
Read "The Daily" Entire Weekend Summary
Here's a trade from "The Daily" and insights into our trading strategy:
Company Profile
You always have to look for sectors getting money pushed their way, and you need to look for leaders in that sector. Shipping is hot; transportation in the US may not be, but worldwide shipping is. We have made money on EXM before during this tremendous run in 2007, and we were looking for the opportunity to enter into the stock again. It formed a nice 7 week cup with handle pattern in July and August, and we played the breakout, making some nice money. When it came back to test that move we wanted to get in and play it again, Sam.
The first test of a breakout is one of our favorite entry points. As EXM came back over a 2 week period to test that breakout, we were watching it closely. In mid-September it came back to test near support at the 10 day EMA and held. That is when we put it on the report (9/15/07). On 9/18/07, just two sessions later, EXM bounced off that test on much stronger volume. That was our cue to move in and we did so with some stock at $46.35 and some December $45 call options at $7.80.
EXM tested the 10 day EMA for 2 more sessions but then exploded higher, gaining $4.43 on tremendous volume. Lots of buyers pushing our positions higher. It added $4.50 the next session, and $3.04 the next. That pushed EXM to our target; not bad for 6 sessions in the market. We took a nice 19% stock gain and sold our options for $13.50, a strong 73% ($570/contract) gain. EXM pulled back some after that surge, making the second test of the breakout. We can play that as well and we are looking at some positions as it completes the test and resumes the breakout run.
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: 10-25-07
STATUS: Test 50 day EMA. VSEA made us some great money in 2006 and earlier this year. It got the dips in August, but it found bottom and moved to a new high to start September. It has since made a very low volume, orderly pullback as the 50 day EMA (50.87) rose to meet it. Looks to have settled down at this point and is ready to make the move higher. When it makes the break on strong volume that is when we move in.
Volume: 772.686K Avg Volume: 1.713M
BUY POINT: $55.12 Volume=2.6M Target=$63.45 Stop=$52.35
POSITION: UES AK - Jan. $55c (54 delta) &/or Stock
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: 11-21-07
STATUS: Test breakout. A new issue in June, SLT is just making the breakout from a 10 week cup base, gapping higher Thursday on strong volume. Tested back modestly Friday on lower, below average volume. A new issue with a lot of strength and great earnings growth rates. Looking to move in as SLT continues higher.
Volume: 803K Avg Volume: 1.548M
BUY POINT: $18.69 Volume=1.6M Target=$22.50 Stop=$17.55
POSITION: SLT CW - Mar. $17.50c (69 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
IH Alerts: InvestmentHouse.com's Best of The Best Plays!
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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