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Weekend Newsletter for
March 9, 2008
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
Bad news provides a platform to sell, and stocks do, but it is not the rout needed.
- NASDAQ sells below January lows then market covers ahead of the weekend.
- Jobs report continues the string of bad economic data.
- Fed sense of timing second only to.
- Looking for a few good stocks . . . to hold the line.
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Market Summary (continued)
The jobs report was weaker than expected but in line with what should have been expected given the weekly jobless claims and flagging economic data the past two months. That was a surprise to investors, yet not; the market was getting used to worse than expected data during its lateral range; thus more bad news is not really surprising even though of late it has started to break the camel's back as the indices sell lower.
As if that was not enough, the Fed announced it was raising its TAF (a.k.a. Taffy) auction amounts to $100B and is taking a lot more different kinds of securities with a 28-day turn versus overnight. I have a few obsolete computers and printers I want to unload; wonder if the Fed would take them now? After all they seem to be bent on doing anything in the hope that it will somewhat help alleviate the once again increasing spreads in corporate bonds and the lack of interest in commercial paper. If I could get rid of those old computers I know the markets would start to calm down.
What the Fed is doing is not a bad idea; it cannot continue running rates down at 50 to 75BP pops and expect to end the credit issues on its own. As discussed last week, the last time this scenario started to unfold the response that worked involved fiscal stimulus in the right places and some higher interest rates. If the Fed had some real help instead of the $600 handouts that worried consumers will save instead of spend (or they spend it on $3/gallon gasoline) it could concentrate on its TAF-like programs that don't fuel inflation as directly as tax cuts yet get money into the system. It worked initially, but the need for more rate cuts worked to undo the narrower spreads and lower LIBOR rates initially achieved. Without the real help it needs from the fiscal side (as evident by the way the market responded to the fiscal stimulus, i.e. selling further) the Fed is locked into its course of action as it has to promote economic growth and stabile prices. It can sit and do nothing or it can try to use the tools it has and Bernanke's speeches pre-Fed indicate that he will act versus sit.
Read "The Daily" Entire Weekend Summary
Here's a trade from "The Daily" and insights into our trading strategy:
Company Profile
COIN is a new, emerging stock in the very hot agricultural chemicals sector, coming public in February 2007. It came to life at the end of that year and really started surging this year. We bought into it in early February as it held near support at the 18 day EMA and surged on into March. We turned that run from $10.38 to $16.68 into a 60.6% bank deposit gain. But as with most strong runners, COIN was not finished and we love to average up into strong stocks and focus our money to make serious gains.
Thus when we saw COIN come back to test the February run and form a very traditional cup with handle base using the 10 day EMA as support, we put it on the report again, looking to buy into it as it made the next upside breakout. We put it on the report on 2-27, looking to grab it as it made its move. It didn't take long. The next session COIN gapped up with volume, and since it had set up a classic pattern and was moving on strong volume we chased it a bit, buying in at $13.73. It closed at $14.74 that session; sometimes it pays to chase. The next session COIN played on its breakout momentum, adding $0.64 or another 4.3%. The next session another $0.52 or 3.3%. It gapped higher the next session, closing a bit off its high at $17.12.
It had put in 5 consecutive upside sessions including the breakout, and we had already hit our initial target on the second position. We sold some stock for $16.72, a nice 21.78% gain in four sessions. Sure enough, Friday it gapped lower and sold off almost 12%, but it tapped the 10 day EMA on the low and bounced. This is the first test of the breakout and we are watching to see if COIN can hold at that near support and continue the move. A strong stock will make 4 to 5 runs off the 10 or 18 day EMA following a breakout, and we love to buy into a stock as it makes that first breakout test. If the market was in better shape this would be a no-brainer. As it is we will watch, and if it holds and bounces up again we are on again. Even in a market selling hard there are stocks in bull runs ready to make you some nice coin.
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: Announced 2-12-08
STATUS: Breakout test. Excellent action to end the week, gapping down Friday but tapping the 18 day EMA (59.26) on the low and rebounding for modest loss. Lower, below average volume as it continued its test from that initial breakout and run higher. Excellent set up for the next move upside. To recap: Made us some great money on its breakout run, and now it is making the test we wanted, coming back to the 10 day EMA (60.68), coming to rest there on the Thursday close on much lower, below average volume. Watching to see if XTO holds at this level and then makes the next break higher in its breakout run. This is the second test of the 10 day EMA after the breakout. When making powerful runs stocks tend to bounce 4 to 5 times off the 10 or 18 day EMA. XTO is one of the stocks that is in a bull market despite the market overall, and it is strong. That means it still has plenty of upside ahead of it.
Volume: 5.214M Avg Volume: 5.973M
BUY POINT: $61.88 Volume=6.2M Target=$70.95 Stop=$60.39
POSITION: XTO HL - Aug. $60c (62 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: Announced 2-26-08
STATUS: Ascending triangle. Nice 4.5 month base has set up, making higher and higher lows up the 90 day MA (32), making a higher low last week at the 18 day EMA (33.50). There is a constant top at 36, and FDP is building pressure for the breakout from below with those higher and higher lows. Strong money flow broke out ahead of the stock and we are looking for FDP to follow it on up. Did well in the last recession and it is set up to do well here.
Volume: 417.3K Avg Volume: 660.358K
BUY POINT: $36.24 Volume=1M Target=$41.95 Stop=$33.98
POSITION: FDP FG - June 35c (60 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.
This email was sent to ~~EMAIL~~.
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