stock split, stock research

Begin Part 3 of 4

PRE-SPLITS BEST PLAYS: Remember, we try to grab these as they break out of good patterns or as they start a run right before the split. Not looking for home runs, but looking for those $3 to $4 moves running into the split, watching for topping signs and potential resistance. Not huge money, but it can be very steady. We set our initial stops at the 7-8% range below the purchase price (or just below obvious support), and move them up on a move to preserve our profits.
1) CUB - Nice pullback to support
2) SMD - Setting up a wedge
3) PMI - Still waiting for a solid bounce

CUB (Cubic Corp--$54.87; -0.33; no options): Scientific & Technical Instruments. Announced a 3:1 split, subject to shareholder approval, date TBA.
http://biz.yahoo.com/p/c/cub.html
STATUS: CUB made a nice breakout from a cup with handle in December, and after tracing back in January to the 50 day MVA (then 45, now 48.97), CUB blasted up on its split announcement. It hit a high of 57.45, and has for the past week and half peeled back on generally low volume. It is now testing its 10 day MVA (54.46) with it intraday lows, today showing a doji on volume of 29,000 (average 34,000). Looking for a bounce and a move to another new high. Target: 64.
PLAY: Bounce: Over 56 on above average volume. Stop: 52.17. New high: 57.55 on above average volume. Stop: 53.52. Stock only.

SMD (Singing Machine--$24.40; +0.30; no options): Karaoke systems. Split 3:2 effective 3-16-02.
http://biz.yahoo.com/p/s/smd.html
STATUS: Another stock that is rather thinly traded, but we have enjoyed some good moves on pre-splits with these small stocks. SMD tripled in the last quarter of 2001, but could be ready to move again now. The stock tested its 50 day MVA (currently 21.64) three times recently, moving up from that level in early February and now tightening in a narrow range over its short-term MVA's (18 day at 23.44) and the 25 level. It is something of a pennant, with the high made on an intraday spike of 26.80 early this month. Volume has been quite low as the stock moves in the current, three-week consolidation. Looking for a strong move out of the pattern on a pre-split run. Target: 29.
PLAY: Over 25, with stock.

PMI (Pmi Group--$70.85; -0.25; optionable): Surety & Title Insurance. Announced a 2:1 stock split, effective date to be determined.
http://biz.yahoo.com/p/p/pmi.html
STATUS: Holding level at the short-term MVA's, and looking for a bounce. PMI has been steadily trending up its 18 day MVA (70.53) as it moves up in the right side of its cup pattern (dating back to June, with the left side high at 74.50; all-time high at 74.94). It is holding right at that level, Wednesday trying a move, but only hitting 71.98 before pulling back with strong volume on the day. We are still riding current positions as PMI holds support, looking for the stock to make a bounce it can hold. The most recent high at 73.25, and the high at 74.94. Targeting 80 on the longer term plays we are in, with 76 the quick target on this bounce before a pullback in the uptrend.
PLAY: From here: Over 72, with stock and/or June $70 calls to buy (PFI FN), with calls being the position of choice if just playing the bounce. Stop: 67.75.

CONTINUING CANDIDATES BEST PLAYS: STJ broke out.
1) HB - Still in the nice pattern
2) DHR - Holding up on the test
3) RARE - Lurking
4) DIAN - On support after pulling back
5) ETH - Moving

HB (Hillenbrand--$59.99; -0.06; optionable):
http://biz.yahoo.com/p/h/hb.html
BACKGROUND: Based upon our research it does not appear that HB has ever split its stock. The company has sufficient shares for a 2:1 split.
STATUS: In the nice pennant pattern, tightening up. After a couple of days featuring high volume, today HB held a tight doji as volume dipped back below the average (139,700; average 148,300). Looking good, and we are just waiting for a breakout move. HB made a big breakout at the beginning of this month, moving from a jagged cup with handle. Target: 70.
BUY POINT: Breakout: Over 60.95 on volume of 200,000. Stop: 57.
POSITION: Stock and/or June $55 calls to buy (HB FK - under 100 open interest).

DHR (Danaher--$67.23; +0.08; optionable):
http://biz.yahoo.com/p/d/dhr.html
BACKGROUND: Last announced a 2:1 split on 3-6-98 with a board meeting. The stock price was $70. The annual shareholder meeting was on 5-1-01 at which time authorized shares were increased. The company has enough shares for a 2:1 split.
STATUS: In mid-February, DHR broke from an ascending wedge that served as the right shoulder in a reverse head and shoulders. On that move it made a test of the 10 day and then shot up again to a high of 69.94, from where it has pulled back to test the 10 day again. It showed a bit more volume on the selling back than we might have liked, but the moves were not severe, and today it showed a loose 'shooting star' doji over support. Still riding the current positions to a target of 72, but we can look at quick bounce positions on a strong move back up from here, still targeting 72.
BUY POINT: Over 68 on increased volume of 1.4 million (1.18 million today, the average). Stop: 65. .
POSITION: June $60 calls to buy (DHR FL).

RARE (Rare Hospitality--$26.89; +0.10; optionable): Restaurants. Forecast to announce a split on 2-19-02 with earnings. The company has not confirmed the date.
http://biz.yahoo.com/p/r/rare.html
BACKGROUND: Last announced a 3:2 split on 7-26-00 in conjunction with earnings. The stock price was 29.50. The annual shareholder meeting was on 5-14-01 at which time authorized shares were increased. The company has sufficient shares for a 2:1 split.
STATUS: RARE is challenging the handle high, but has had very light volume on the last move up. It has leveled out the last few days, showing consecutive dojis as volume remained very low (121,100; average 273,000). We will see if RARE can hold the short-term MVA's (18 day at 26.09), and generate a breakout move. Target: 32.
BUY POINT: 27.15 on volume of 380,000. Stop: 25.25.
POSITION: Stock and/or May $25 calls to buy (QRH EE - low open interest).

DIAN (Dianon Systems--$61.85; -0.15; optionable): Forecast to announce a split with earnings on 2-21-02 before the open.
http://biz.yahoo.com/p/d/dian.html
BACKGROUND: Based upon our research it does not appear that DIAN has ever split its stock. The annual shareholder meeting was on 10-25-00 at which no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: DIAN made a couple of very strong moves in February, first bouncing from the 50 day MVA (currently 58.22, then 57), and then breaking to a new high last week (68.01). The move abruptly ended Monday with a drop back, but although volume was strong it did not come close the previous buying volume. Since that big drop DIAN has held the 18 day MVA (61.59), which is right with prior highs. Volume has continued to dip back, coming in at 304,600 (average 289,400) today on the second consecutive doji. If it can continue to hold, we will see if the stock can bounce and continue the move toward the target, which on the breakout was 72. If DIAN can move back over the high, we can still look at that target.
BUY POINT: Aggressive: A move over 63.25 on increased volume. Stop: 60.
POSITION: Stock and/or May $60 calls to buy (UID EL).

ETH (Ethan Allen--$40.53; +0.70; optionable):
http://biz.yahoo.com/p/e/eth.html
BACKGROUND: Last announced a 3:2 split on 4-28-99, approximately 2 weeks after earnings release. The stock price was $35. The annual shareholder meeting was on 11-15-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Continues to show strength on the move up, today continuing to hit an intraday high of 41.10 before pulling back a bit to close. Volume shot back up to 359,100 (average 205,000), and ETH is making good headway on its recovery from a test of the 200 day MVA (36). It could need a rest here, so we will see if it can hold up, watching support from prior highs at 40 (former 'shoulder' highs of its head and shoulders). The 50 day MVA at 38.56. Target: 48.
BUY POINT: Momentum: Still holding positions, and we can look at new ones after ETH holds 40 on a test back, with a move back over 41 on volume of 300,000 or better. Stop: 38.23 (7%).
POSITION: Stock and/or May $35 calls to buy (ETH EG).

POST SPLITS BEST PLAYS:
1) MGAM - Nice breakout!

MGAM (Multimedia Games--$31.57; +2.77; optionable): Split 3:2 on February 12.
http://biz.yahoo.com/p/m/mgam.html
STATUS: Got the move we were looking for, a breakout from the pennant MGAM had formed after its bounce from the 50 day MVA a few weeks ago. Volume was very strong in support of the breakout, coming in at 788,000 (average 232,000). MGAM pulled back from 32.40 to close, but we will look for more upward movement from here toward the target of 35. Still a buy up to 32.35.
PLAY: Still a buy up to 32.35 on good volume. Stop: 29.40-30.10 (7%). Stock and/or July $25 or $30 calls to buy (QMG GE - no open interest or QMG GF - low open interest)

End Part 3 of 4

stock split
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