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Begin Part 2 of 2
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
2-25-02
Existing Home Sales, January (10:00): 6.04M annualized units (+16.2%) actual versus 5.25M expected and 5.19M prior.
2-26-02
Consumer Confidence, February (10:00): 94.1 actual versus 97.0 expected and 97.8 prior (revised from 97.3).
2-27-02
Durable Orders, January (8:30): 1.0% versus 1.7% prior.
New Home Sales, January (10:00): 925K versus 946K prior.
Greenspan son of Humphrey Hawkings testimony
2-28-02
Initial Claims, 2/23 (8:30): No information yet.
GDP, preliminary Q4 (8:30): 0.6% versus 0.2% prior.
Chain Deflator, Q4 (8:30): -0.3% versus -0.3% prior.
Chicago PMI, February (10:00): 47.0 versus 45.1 prior.
Help-Wanted Index, January (10:00): 46 versus 46 prior.
3-01-02
Truck Sales, February (Time not supplied): 7.1M versus 7.1M prior.
Auto Sales, February (Time not supplied): 5.3M versus 5.3M prior.
Personal Spending, January (8:30): 0.4% versus -0.2% prior.
Personal Income, January (8:30): 0.1% versus 0.4% prior.
Mich Sentiment-Rev., February (9:45): 91.0 versus 90.9 prior.
ISM Index, February (10:00): 51.0 versus 49.9 prior.
Construction Spending, January (10:00): 0.1% versus 0.2% prior.
TEAM TRADES
QQQ: After we figured out that part of the problem with the selloff this morning was another rumor about troops in Iraq and we saw the Nasdaq hold at 1745, we decided to add to some QQQ positions to take advantage of a continued move up toward 36.25 or so. We saw it bottom and then decided to take some quick action. The April 29 calls (the index was at 34.80) were trading 6.20 by 6.40. These are very liquid options, and we thought about trying to shave the spread. The index was moving quickly, however, so we went ahead and put in a limit order at 6.40. The fills on these are instantaneous. The QQQ ran up to 35.10, then 35.30 in the last hour. It looked as if the recovery scenario we were playing was working well. The Nasdaq ran out of steam toward the close, however, and the Q's fell back to 34.90 on the close. The last bid and ask was 6.30 by 6.50; we were right in the middle after it was all over. We need to be careful with these; we did not like the pattern of the Nasdaq on the close.
THE PLAYS:
Reading the Plays: Please note that when we reference the 10, 18, and 50 day moving averages (MVA), those are exponential moving averages (EMA). The 200 day moving average is always simple (SMA). We will note when we reference a particular MVA differently, e.g., a simple 50 day MVA. Please click on the Yahoo and chart links for company and charting information. A "prior high" refers to the high at the start of a base.
For conserving space on listings of stop losses, the symbol (7%) indicates that the stop is 7% below the buy point.
Good movers: WMT, LYTS, ASL, RGFC, FRK, TIER
Stop Advisory: EMBX (17.19)
Stocks/Indexes from the Monday report:
RMCI: Held with a tight doji on a slight gain after Monday's strong move up in the cup.
LOW: Popped higher Monday, but fell back on lower volume today. Tapped the 18 day MVA on the low. In a 2-month flat base.
STAR: Holding steady in the reverse head and shoulders/cup pattern, volume edged higher above average.
LYTS: Strong breakout after the test, and on huge volume! Too extended for us now; we will look for a pullback, but a strong move.
DGX: Fell back below the 18 day MVA and the up trendline (Nov/Jan closing lows) in the cup base. Volume just higher but still well below average.
Continued plays:
Covered call:
FRED: May hold at that lateral consolidation. The stock gained three cents and is showing a hammer doji after the pullback, and with volume continuing to fall, looks ready to move up. We were looking for a fall through to the 18 day MVA but looks bullish here.
Other continued plays:
ACE: Keeps moving up from support after testing the breakout from the flat base, but volume just isn't backing the move. Thus, it might not be able to break out over the February high (44.76)!
ASL: On the weekend report, covered as an ascending wedge, but now looks like a short double bottom. Volume was up sharply and the stock is close to our buy point of 5.12 after closing at 5 (see the 2-23 report).
FRK: Still moving on the ascending wedge breakout (a buy to 42.61) though volume hasn't been stellar. Still, we will take the gain!
PCX: So close to the buy point of 30 in the cup with handle base (the stock closed at 28.97)! Volume is rising on the move up from support.
TIER: Finally made a decent break lower, but volume still keeps falling. However, it can at least fall to the February low at 16.60 for the short. Our original target was 16, and if the selling picks up the stock stands a chance to make it down that far.
Best Plays:
1) MVL: Nice pullback in the test.
2) ODP: Flying plateau.
3) PFGC: Tightening up in its pattern.
4) GYMB: Looks ready for a breakout!
New:
MVL (Marvel Enterprises--$5.71; -0.02; no options): Consumer Durables: Toys
http://biz.yahoo.com/p/m/mvl.html
STATUS: Pulling back from its recent breakout, which occurred after a test the breakout from a 7-month cup base. The stock tapped at 5.43 and 5.45 Friday and Monday, then hit a higher intraday low Tuesday (5.60), so looks like it can hold the support (10 day MVA is at 5.46). Volume is falling off nicely the last 2 days, off from the very strong volume on the recent breakout (down Tuesday to 97,400; avg. 205,136). MVL may consolidate another day or two at the support before breaking back up again. The February high attained on the breakout is 6.29. MVL is in a bigger, 20-month base with highs near 7.50. Money flow and relative strength are at high levels. Target: 7.50
BUY POINT: Aggressive: 5.85 on volume of 130,000 or higher. Stop advisory (7%): 5.44
POSITION: Stock.
http://www.investmenthouse.com/cd/mvl.html
ODP (Office Depot--$18.95; +0.15; optionable): Specialty Retail
http://biz.yahoo.com/p/o/odp.html
STATUS: Another test of the breakout. ODP made a strong move off of the 50 day MVA several days ago on news of strong 4th quarter profits, and is moving in a flying plateau pattern as it tests the move. Volume is falling off very nicely and well below average (1 million Tuesday; avg. 2.3 million) with the pattern holding at and just above the December high (which is at 18.70). Looking good, and we look for another breakout over the February high at 19.75 with volume surging back up. Excellent money flow and high relative strength. Target: 24
BUY POINT: Breakout: 19.50 on volume of 3 million or higher. Stop advisory (7%): 18.14
POSITION: Stock and/or July $15 calls to buy (ODP GC).
http://www.investmenthouse.com/cd/odp.html
CVH (Coventry Health Care--$23.95; +0.09; optionable): Medical Practitioners
http://biz.yahoo.com/p/c/cvh.html
STATUS: In an ascending wedge just above mid-point in a 6.5-month cup base. The wedge is where we would like to see a handle, but can still give a breakout and when it tops out we can look at taking profits there or assess the value of holding positions through a pullback (perhaps another handle?). Volume is falling off appropriately in the pattern, down Tuesday to 93,800 (avg. 269,000). Looking for a breakout over upper resistance in the ascending wedge, at the 24 range. The stock shows huge money flow and high relative strength. Target: 28.75
BUY POINT: Breakout: 24.30 on volume of 404,000 or higher. Stop advisory (7%): 22.60
POSITION: Stock and/or July $20 calls to buy (CVH GD).
http://www.investmenthouse.com/cd/cvh.html
PFGC (Performance Food Group--$38.49; -0.01; optionable): Food Wholesale
http://biz.yahoo.com/p/p/pfgc.html
STATUS: Forming an ascending wedge type pattern above the 18 day MVA (37.46) after breaking out of a cup with handle base in late January. The first peak in the pattern, on the breakout high at 38.20 (closing high) is not quite as high as the last (and most recent) two at the 38.80 range, but the stock is posting the higher lows that are characteristic of the wedging pattern. Volume has been low in the pattern (down Tuesday to 143,800; avg. 465,300), and we like that. Looking for a breakout over the February high at 39.21 on strong volume. Money flow and relative strength excellent. Target: 47
BUY POINT: 39.31 on volume of 628,000 or higher. Stop advisory (7%): 36.56
POSITION: Stock and/or June $35 calls to buy (PGU FG).
http://www.investmenthouse.com/cd/pfgc.html
Update:
GYMB (Gymboree--$14.40; +0.68; optionable): Retail: Apparel
http://biz.yahoo.com/p/g/gymb.html
STATUS: Making its move in the handle to the year-long cup base. Volume was higher and up sharply to 511,300 (avg. 446,100) as the stock popped off of the 18 day MVA (13.67) after tapping at the 50 day MVA a week ago. Looking for the breakout over the January handle high at 14.71! GYMB shows excellent money flow and high relative strength. Target: 18
BUY POINT: 14.81 on volume of 670,000 or better. Stop: 13.77 (7%)
POSITION: Stock and/or May $12.50 calls to buy (GQU EV).
http://www.investmenthouse.com/cd/gymb.html
PORTFOLIOS: Each report, we look at these to see which is in a buy position. We don't cover them all each time, just the ones that look ready to pick up a few shares.
THE LEADERS: DGX, FRX, LLL, MIK, BMET, APPB, IGT.
LLL ($109.64; +0.85): Tapped near the support level (18 day MVA, 106.17) where we expected LLL to fall for support in the covered call sale play. Volume was lower as the stock bounced back up and closed above the 10 day MVA (108.65). LLL may hold here for another bounce up. The March $105 calls are now selling for $7.10; down 2 points from when we wrote the play (2-21).
UP & COMERS PORTFOLIOS: BBBY, SRCL
SRCL ($64.20; 0.00): Ready for a pullback after breaking out of the cup three days ago.
We can look at selling covered calls but the December consolidation just above 60 could cut the move to about 2 points instead of 3 or more for a complete drop to the 18 day MVA (currently at 60). On a move down from here, April $60 calls to sell ($6.80 and a delta of 0.73). They can drop in value to about $5.30 for the 2-point move, but to about $4.00 for a test of the 18 day MVA.
MEMBER PORTFOLIO: CSCO, SEBL, EMLX, BRCM, HDI, BRCD, BUD, AMGN, WMT, ORCL, HB, NOC
HB ($59.87; +0.57): Getting ready for a bounce from the 18 day MVA as volume blasted well above average. Buy point is over 60 (for aggressive positions), stock and/or June $55 calls to buy (HB FK).
WMT ($62.10; +1.45): Broke out on strong volume today, clearing the recent month-long consolidation and posting a new closing high. WMT is in a 2-year base with highs near 70, so is getting close to clearing that as well!
HDI ($50.01; -0.92): Selling down toward the 200 day MVA and breaking below the April/November up trendline. It has the 200 day MVA at 49.18, which coincides with a January/November up trendline, that can hold it up. That is as low as we can let it go before selling.
EMLX ($37.00; +0.15): Inched higher as volume fell lower, and below average. Showing a hanging man doji, which can mean a move back down. If the Nasdaq doesn't head up from here, can fall back through our buy point of 36.05 (hit for the upside play). Not the move we wanted; won't let it fall below 35.
Good Investing!
Jon L. Johnson and The Daily Staff
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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