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Weekend Newsletter for
October 7, 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
Just right jobs report pushes SP500 to a new high.
- SP500, NASDAQ ride in-line jobs report, August revisions to new post-2002 highs.
- Jobs report: Okay, so what if the government was off by 93,000?
- Will Fed cut another one after stronger jobs report?
- Still a lot of negativity regarding the market even as indices break higher.
- With the continuing economic re-recovery, time for industrials to resume their move, and small caps are trying to help as well.
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Market Summary (continued)
The market was set up to move higher and looking for a trigger. The in-line jobs report (110K versus 100K expected) and a rather massive revision to August (+89K from -4K) provided the spark to break the indices higher. Well, it provided the spark, but it was not an explosion higher. Part of the powder didn't ignite. SP500 broke to a new all-time high and NASDAQ added a lot to its earlier move to a new post-2002 high. DJ30 was up, but its move was nowhere near its large cap brethren, and after pushing to a new high intraday it faded. Held a gain, but a mere shell of the other indices.
The jobs report was the keynote address, but there was other news pre-market, some good, some not so good. RIMM was up on its results; once again after hours action does not necessarily represent what happens during the full session. RIMM dragged AAPL along with it along with some other big techs. On the flipside, NBR (drilling) guided lower due to a falling North American rig count. MER warned re its Q3 due to heavy write-downs in assets related to the sub-prime issues. Outside the jobs report, life goes on as usual.
Stocks started higher out of the gate. The dollar started higher as well, pushing oil a bit lower and keeping a lid on the energy stocks again. After that higher open the action was up and down through midmorning. Then the market broke from that range and headed nicely higher. Some word that the commercial paper market was improving as a few companies were placing their paper, and the Fed's Kohn had some decent things to say about the prospects of more Fed action.
Read "The Daily" Entire Weekend Summary
Here's a trade from "The Daily" and insights into our trading strategy:
Company Profile
EARNINGS: 10-23-07
STATUS: Reverse head and shoulders. Taking another run at AMX after it sold on some rising volume midweek, but then recovered off the 18 day EMA off the 18 day EMA (63.51), bouncing higher on the best volume in three weeks Friday. This move is taking AMX out of a 15 week base toward a new all-time high. After a solid April to early July run from the last breakout, this base is setting up a nice foundation for the next breakout and run higher. Solid volume Friday as it bounced off near support and heads toward a new breakout.
Volume: 7.116M Avg Volume: 5.849M
BUY POINT: $65.88 Volume=7.5M Target=$75.95 Stop=$63.92
POSITION: AMX AM - Jan. $65c (58 delta) &/or Stock
Learn more about "The Daily" with Stock Picks! - Issued 5 Times Per Week
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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).
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: Double bottom w/handle. After a 4 month rest and basing period, the independent oil and gas stocks are shaping up for a new breakout move. COG is one doing just that. After a nice run from March into June it has formed the current 15 week base. Volume surged to end last week, and on Friday COG jumped higher on the best volume in 2 months. Money flow is plowing higher and leading the way for price to follow. Ready to move in as COG continues the run higher.
Volume: 1.331M Avg Volume: 873.574K
BUY POINT: $37.57 Volume=1.3M Target=$43.65 Stop=$35.91
POSITION: COG AG - Jan. $35c (73 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
This market is not made only of metals and oil. Technology has led as well, particularly obvious the past week as NASDAQ made a new post-2002 high ahead of the other indices. It is not just AAPL, RIMM, BIDU and company, however. The move is spreading out and that has allowed us to play some great 'lower priced' stocks.
CIEN is such a stock. It caught our eye as it formed a nice, compact base over the 50 day EMA, consolidating a nice June to July run. We watched it trade on below average volume as it worked laterally, then on 10-1-07 (Monday) it jumped higher and cleared the interim highs in its base, rallying on stronger, above average volume. That prompted us to put it on the report. The next session it continued the move with a strong surge on more strong volume. We moved in with some stock positions at $41.01 along with some January $35 strike call options at $4.80. It looked as if we were catching the start of a strong move and we wanted to have plenty of exposure.
Sure enough it was up $3.49 that session, closing near $43. It added another $2.57 the next session, closing at $45.23 on some very strong volume. No reason to step in the way of the move so we let our positions run. It took a breather on Thursday, closing basically flat but on much lower volume. That low trade told us it was just taking a pause after two very strong sessions. Friday came and it was up again, rising to $47.25 on the intraday high. We saw volume remained low even as CIEN continued to run higher on the session. That indicates there were fewer buyers and that the move was starting to lose some steam; after 7 consecutive upside sessions that was understandable.
We sold some of our stock positions at $47.17, landing a 15% gain. We also took some of the options off the table, selling them for $9 or an 87.5% gain ($420/contract). While CIEN is likely to take a pause here, we like the action and wanted to keep some positions to work for us. Indeed, if it makes a nice low volume test we will look to add some positions when it bottoms and starts higher again. Not bad for four days in the market.
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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