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Begin Part 2 of 2
TEAM TRADES
Once again we were taking positions in stocks we felt had potential to show real strength in the moves we are anticipating to come as well as stocks we think are going down.
JNPR: This powerhouse was trading down toward the 102 level we targeted as support in the weekend report. When we started to see it move up off the 102 to 103 that was a good point to averaging into some more shares. It raced up to 112, and we were feeling good, but the selling started over and it sold all the way back to 103-104 with an hour to go. That is when we saw the VIX spike and stocks start to move up. Another hold at 103, so looked good for some more positions. This turned out to be right, and the stock ran to the 115 range on the close and was up to 117 after hours.
SUNW: Another stock showing support at the 25 to 26 range as noted in the weekend report. SUNW hit about 26.50 on its low and tested that point three times later in the session. When we saw the VIX spike and stocks start to surge, we jumped in with more shares. We were not able to get the order right until the stock was trading 27 by 27.06, but we liked what we saw and put in the limit order at 27.06. The price ticked to 27.06 by 27.13, but we were filled at 27.06. The stock moved up well and was trading at almost 28.75 after hours.
For a review of frequently asked questions, please use the link below:
http://www.investmenthouse.com/1questions.htm
THE PLAYS: Many of the food, drug, drink and defensive plays recently covered have been removed, though several others are listed at the bottom of the report for short positions, as they are primed for a move down as the techs look ready to move up next week.
All prices reflect prices at the close on Monday
SOME LEADERS TO WATCH:
AMCC (Applied Micro Circuits--$64.13; +0.63; optionable (AZV)): Semiconductor
http://biz.yahoo.com/p/a/amcc.html
STATUS: Holding at the level of Friday's doji, just higher on lower volume (13.7 million; avg. 16 million). The stock ran up in the last hour of trading on great volume, after testing the short term up trendline on the low of 57.63 and closing above the opening price of 62.25. Look for a move up in a market rally, watching the 10 and 18 day MVAs at 67.68 and 66.84 (respectively) for resistance. The 50 day MVA higher at 68.08. The stock was up slightly in after hours trading (at the time of this writing). Earnings out January 16.
BUY POINT: Aggressive: On a move up from here on rising volume.
POSITION: Stock and/or February $60 calls to buy (AZV BL).
EMLX (Emulex Corp--$74.00; +4.12; optionable (UMQ)): Computer Hardware
http://biz.yahoo.com/p/e/emlx.html
STATUS: Behaved as expected, making the move back over the 50 day MVA (71.45) after testing a low of 62.50 (below the stock's up trendline). Volume was lower, though it surged in the last hour of trading when the stock jumped up to the closing price (4 million; avg. 4.4 million) but closing just under the 18 day MVA (74.64). Look for a move over that level on stronger volume as the momentum carries over. EMLX has resistance at 80-81. Earnings are out January 18.
BUY POINT: Aggressive: Over 75 on rising volume. Safer: Over 81 on volume in the range of 5.3 million.
POSITION: Aggressive: Stock and/or April $75 calls to buy (UMQ DO). Safer: Stock and/or February $80 calls to buy (UMQ BP).
Best Plays:
1) FITB: Look for a move up from support in a rally.
2) XOXO: Ready to move back up in the wedge pattern, on a pullback to support.
3) MXT: Holding support and ready to move up in a rally.
4) EDS: Ready to move up from the doji.
5) MER: Looks ready to move up in the handle.
6) JPM: A second test of support at the base of its handle.
7) Puts: CAH, BMY, CPN
READY TO BREAK TO A NEW HIGH:
Continued Play:
FITB (Fifth Third Bancorp--$57.94; -1.25; optionable (FTQ)): Regional Bank (Midwest)
http://biz.yahoo.com/p/f/fitb.html
STATUS: Couldn't hold above the 10 day MVA (58.78) and pulled back on lower volume (2 million; avg. 2.2 million). Look for this support level to hold the stock on the lower volume, as we anticipate a move back up in a rally. Still holding above the October top of 57.88. Earnings out January 16. We'll continue watching the financials to do well in a market rally and on further Fed rate cuts.
BUY POINT: Over 59 (to beat the 10 day MVA) on above average volume.
POSITION: Stock and/or February $55 calls to buy (FTQ BK).
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.
New Play (from the weekend):
WFC (Wells Fargo & Co New--$51.88; -0.50; optionable (WFC)): Banking
http://biz.yahoo.com/p/w/wfc.html
STATUS: Pulled back on lower volume (4.5 million; avg. 4 million) as price slipped below the 18 day MVA (52.33), the high tapping 52.63 just like it did Friday. Want to see the stock move back over the support level, and if we get a rally pretty quick look for a break over the 10 day MVA (52.96) to clear all resistance. WFC successfully tested its recent breakout point of 50.07 (cup with handle), and is ready to move back up. Money flow ticked back up and is at high levels. Earnings out January 16.
BUY POINT: Over 53 on stronger volume in a rally.
POSITION: Stock and/or February $50 calls to buy (WFC BJ).
Continued Plays:
MMM (Minnesota Mining & Mfg--$115.25; +0.69; optionable (MMM)): Conglomerates
http://biz.yahoo.com/p/m/mmm.html
STATUS: Attempting to move up after a breakout test, MMM inched up to close on top of the 18 day MVA, rallying just before lunch through the end of the day. Volume was lower but remains strong at 2.7 million (avg. 2 million), pushing the stock up from a low of 109.56. Trying to hold up on the Lehman downgrade; we like the price movement (also closing over the opening price of 113) but look for stronger volume in a rally to sustain and/or better this move. Earnings out January 24.
BUY POINT: Over 116.60 (10 day MVA) on stronger volume.
POSITION: Stock and/or April $115 calls to buy (MMM DC).
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):
XOXO (Xo Communications--$20.50; -1.50; optionable (QNF)): Domestic Telecom
http://biz.yahoo.com/p/x/xoxo.html
STATUS: Pulled back in the ascending wedge, dropping just below the 50 day MVA (20.81) but on volume that dropped sharply back to 4.7 million (avg. 5.7 million). The low of 20.25 tested near support at the 20 level; the lower volume suggests that the stock will hold above 20 until a rally. If not, look for pullback to the 10 day MVA at 19.30 before heading back up. Decent money flow and strong buying.
BUY POINT: Aggressive: On a move up from 19.30 (10 day MVA) or better, on stronger volume. Breakout: 25.13, on continued strong volume (minimum breakout volume is 1.35 times average volume for ascending wedges). Remains a buy on the breakout up to 25.26.
POSITION: Aggressive: Stock and/or April $17.50 calls to buy (QNJ DW). Breakout: Stock and/or April $25 calls to buy (QNF DE).
Continued Plays:
ORCL (Oracle Corporation--$29.94; -0.19; optionable (ORQ)): Software
http://biz.yahoo.com/p/o/orcl.html
STATUS: ORCL dropped to a low of 27.56 but in the last hour of trading rallied with other tech stocks on good volume (reaching 40.6 million; avg. 44.3 million). Need a quick move back over the 50 day MVA (30.21), and on the rising volume, the stock looks ready to do that in a market rally. The former ascending wedge pattern showed a high of 33.25. Good buying.
BUY POINT: Over the 50 day MVA (31) on continued rising volume.
POSITION: Stock and/or February or March $30 calls to buy (ORQ BF or CF).
MEL (Mellon Financial Corp--$47.88; -1.43; optionable (MEL)): Banking
http://biz.yahoo.com/p/m/mel.html
STATUS: Dropped from its wedging pattern (the stock was formerly in an ascending wedge and has been trying to get back into it) and broke support of the 18 day MVA (49.31), moving down to close on the 50 day MVA. Volume was down to average at 1.77 million. Looking for a bounce back up from here, for a move over the 18 day MVA. The long-term up trendline (connecting the May and June lows) is just below the 50 day MVA, added support. Earnings are supposedly out January 16, but there are conflicting dates.
BUY POINT: Over 50 (back over the 10 day MVA at 49.48) on volume in the range of 2.4 million.
POSITION: Stock and/or March $50 calls to buy (MEL CJ).
BASING/TRADING RANGES:
New Plays:
LEH (Lehman Bros--$73.25; -2.75; optionable (LES)): Brokerage
http://biz.yahoo.com/p/l/leh.html
STATUS: Fell to the 10 day MVA (71) but pushing up in the last hour of trading (with the techs). These brokerage stocks move with the market, and in a tech rally we are looking for them to move up as well. LEH has formed a handle on this move as volume moved just higher (and just above average) to 2.7 million; the stock can move up from here, but in a delayed rally can pull back again toward the 10 day MVA. Handle high is 81. Strong money flow and high relative strength.
BUY POINT: Aggressive: On a move up after a pullback to 71, on rising volume. Breakout: 81.13, on volume of 3.4 million or better.
POSITION: Aggressive: Stock and/or February $70 calls to buy (LES BN). Breakout: Stock and/or April $77.50 calls to buy (LES DW).
Continued Plays:
From the Thursday TTR update:
MXT (Metris Companies Inc--$30.13; +0.07; optionable (MXT)): Credit Services
http://biz.yahoo.com/p/m/mxt.html
STATUS: After making a strong break from a type of pennant pattern in the bottom of its 14-week base, the stock has dropped a bit but is holding over the support of its 200 day MVA (29.41), showing a doji. Looks like a handle to the 5-week cup base that is in the bottom of a larger base (prior high 42.94). Volume dropped back below average (525,100 today; average 644,400). Prior basing high in the shorter base is 36.38, handle high at 32.25. The stock shows rising money flow and decent buying. Earnings are out January 17.
BUY POINT: Breakout: 32.38, on volume of 967,000. Remains a buy on this breakout up to 34.
POSITION: Stock. February and April options had insufficient open interests (too illiquid for this stock).
Continued Plays:
KEI (Keithley Instruments Inc--$40.63; +2.07; optionable (KEI)): Electronics (scientific and technical instruments)
http://biz.yahoo.com/p/k/kei.html
STATUS: KEI made a fine move on the rate cut last week, but pulled back Friday on lower volume from the resistance of the 50 day MVA (46.61). Today the stock stopped the drop, pushing back up a bit to close on top of its 18 day MVA on sharply lower, below average volume (343,600; average 519,600). The stock rallied at the end of the day, and in a market rally we will look for KEI to continue back up toward the 50 day, looking for stronger volume. Buying continues to look good. Earnings are out January 18.
BUY POINT: On a move up in a rally, looking for increased volume. Watch 50 day MVA.
POSITION: Stock. February and April options have insufficient open interests for the stock.
EDS (Electronic Data Systems--$54.75; -0.31; optionable (EDS)): Software (information technology)
http://biz.yahoo.com/p/e/eds.html
STATUS: After pulling back in its handle Friday, the stock tapped back to its 50 day MVA (at 53.49) at its low of 53.25 before recovering to close with a tight doji. Holding support is a good sign, and the pattern indicates a possible move back up. The handle pattern now looks like an ascending wedge, with the high at 60.
BUY POINT: Aggressive: On a move back up from here on stronger volume (slightly down to 2.19 million today; average 2.27 million). Breakout: 60.13, on volume of 3.4 million or better.
POSITION: Aggressive: Stock and/or February or March $50 calls to buy (EDS BJ or CK). Breakout: Stock and/or February $55 calls to buy (EDS BK).
MER (Merrill Lynch & Co--$71.25; -0.31; optionable (MER)): Brokerage
http://biz.yahoo.com/p/m/mer.html
STATUS: Pulling back in a handle after a huge move up last week on the rate cut, showing a doji today after tapping down to 69.63 at its low (the 10 day MVA is at 69.37). MER is close to breaking out of its 4-month base (prior high of 74.63), and we look for a move up from here. Support looks sturdy at 71.13, a price the stock hit 5 times since August. Handle high is 75. Continued high money flow and relative strength.
BUY POINT: Aggressive: A move up from here on increased volume (down to 4.17 million today; average 4.6 million). Breakout: 75.13, on volume of 6.5 million or better.
POSITION: Aggressive: Stock and/or February or April $70 calls to buy (MER BN or DN). Breakout: Stock and/or April $75 calls to buy (MER DO).
CYTC (Cytyc Corporation--$52.97; -4.41; optionable (YQK)): Electronics
(scientific/technical instruments)
http://biz.yahoo.com/p/c/cytc.html
STATUS: Did not get the bounce up from the 50 day MVA (56.85) as the stock tanked through that support. The drop was on slightly lower, but continued strong volume of 991,900 (average 606,000), as the stock tapped near its 200 day MVA (49.91) at its low of 50.75. CYTC had been bouncing up along its 50 day as it made its way up the right side of its base. We will see if it can recover, but for now, no new positions.
JPM (J.P. Morgan & Co--$49.25; +0.31; optionable (JPM)): Banking
http://biz.yahoo.com/p/j/jpm.html
STATUS: Made a great move up last week as the stock pushes up in the right side of its four-month cup base, but has pulled back from that move toward the support of its 200 day MVA (at 48.31) in a handle. The stock has tapped that support each of the last two sessions, showing a doji today. The doji over support could indicate a nice move back up toward the breakout (handle) high, at 54. Volume Monday was 9.9 million; average is 8.8 million).
BUY POINT: Aggressive: On a move up from here on increased volume. Breakout: 54.13, on volume of 14.9 million or better.
POSITION: Aggressive: Stock and/or February or March $45 calls to buy (JPM BI or CI). Breakout: Stock and/or February or March $50 calls to buy (JPM BJ or CJ).
PUT PLAYS: These plays are on some defensive stocks that look ready to move back down from resistance levels, some of which were tested Friday on moves up on lower volume. They are all setting up beautifully, most of them tapping again at resistance on lower volume.
New Plays:
CAH (Cardinal Health Inc--$93.00; +0.75; optionable (CAH)): Wholesale drugs
http://biz.yahoo.com/p/c/cah.html
STATUS: After breaking below the 50 day MVA (94.32) the stock made a bounce back up Friday, but volume continued down today (1.36 million; about average) as the stock edged back up closer to the 50 day. Looks good for a put play, perhaps after tapping up at its 50 day. The recent low is at 87.
BUY POINT: On a move back down, perhaps after tapping up to the 50 day.
POSITION: February $95 puts to buy (CAH NS).
UNH (Unitedhealth Group Inc--$53.75; -0.19; optionable (UNH)): Health care plans
http://biz.yahoo.com/p/u/unh.html
STATUS: Dropped heavily last week, falling hard through its 50 day MVA (56.78) before showing consecutive dojis, today a perfect doji after reaching up to 55.44. The stock might try a move back up toward the 50 day MVA off of the dojis, though it may not move over the intraday high of 55.44. Either way, we will let it try a run up to the moving average, and on a move back down from there, will look at playing the put (the "kiss good-bye" after testing the previously broken support level).
BUY POINT: On a move down from the 50 day MVA after the stock moves back up to test the broken support.
POSITION: Aggressive: February $60 puts to buy (UNH NL).
BMY (Bristol-Meyers Squibb Co--$65.06; +0.75; optionable (BMY)): Drug manufacturers
http://biz.yahoo.com/p/b/bmy.html
STATUS: Another stock that fell hard last week, ducking below its 50 day MVA (66.29) and setting up very nicely for a put play. After tapping as low as 60.75 Thursday the stock has made small moves back up, tapping the 50 day at its high each of the last two sessions (66.69 today; the 50 day is currently at 66.29). The doji pattern under resistance indicates a drop, and we can look at puts back down to the 60 range (the 200 day MVA is at 58.07).
BUY POINT: A move down after another tap at the 50 day MVA, looking for increased volume on the selling (4.38 million; average 4.77 million).
POSITION: February $70 puts to buy (BMY NN).
CI (Cigna Corp--$118.95; +3.95; optionable (CI)): Health care plans
http://biz.yahoo.com/p/c/ci.html
STATUS: Setting up nicely for the put. The stock made a move back up toward its 50 day MVA (122.43) Monday, bouncing up off of Friday's doji. However, the move does not look strong, coming on much weaker volume (641,700; average 812,700), and looks like we could get a fall back after this failed test of the 50 day. We can look for a put play from here or after the stock makes another try at the 50 day. Recent low is 112.75.
BUY POINT: On a move down from here on increased volume, or a move down after a failed attempt to move up to the 50 day.
POSITION: From here April $120 puts to buy (CI PD). Test April $125 puts to buy (CI PE).
CPN (Calpine Corp--$34.19; -0.87; optionable (CPN)): Utilities
http://biz.yahoo.com/p/c/cpn.html
STATUS: Fought its way back to its 200 day MVA (35.96), gapping over that level today before selling back on lower, below average volume (3.72 million; average 3.58 million). We were looking for a move back down after a test of the 200 day, and we can look for a continued move down toward its recent low of 29. We can look at additional positions on a move down on increased volume, and perhaps after another test of the 200 day.
BUY POINT: On a move down from here, or down from the 200 day MVA after the stock moves up to test that level.
POSITION: April $40 puts to buy (CPN PH).
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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