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Weekend Newsletter for
April 6, 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
Another round of bad news, another nice consolidation to set up the next run.
- Bad news takes its shot, market holds its gains.
- A long time coming, but market finally shows some rotation.
- Jobs report tries to upset the market with more recession speculation.
- Earnings are coming as the market sets up for more gains.
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Market Summary (continued)
Friday it was the jobs report with the 80K loss topping expectations, downgrades, and some earnings misses. All week, however, it has been one less than cheery economic story after another. Jobless claims spike over 400K, manufacturing continues to contract, the service sector posts a third month of contraction, factory orders nearly double their downside expectations. All week it was one weak report then another.
Nonetheless, the market held up. Indeed, it started the week with a big bang as stocks exploded higher Tuesday, launching back to the upside after a week of testing the move off the March low. It could not keep the pace up after 3.5% gains that session, but it did something it has not done in the past: it held its gains. Further, it held its gains in the face of bad news, finishing out the week flat and on low volume. It is a very good sign of health when the market can weather blows that would have cratered it before.
Another sign of strength: rotation. In the selloff from the October peaks the only stocks moving higher were those feasting on the dollar's decline: energy, gold, other metals, commodities in general, and agriculture. Everything else fell while they rose, getting all of the money invested in the market. Now there are other good stocks that have set up nice patterns, forming up for the breakout or indeed already breaking out. They started showing up on the move off the March low, and again on the Monday and Tuesday upside moves. As the market moved laterally the rest of the week, the energy, commodity and agriculture stocks started moving higher once more as the new emerging leaders took a break.
That is the kind of action you really like to see, and it shows that this rally, whether 'the' bottom or just an interim one in a further selloff, has underlying strength. Stocks from many different sectors are forming up and breaking higher, e.g. tech, telecom, transports, and other appear to have bottomed for now (housing, financials). Again, this is a sign of new health in the market.
Read "The Daily" Entire Weekend Summary
Here's a trade from "The Daily" and insights into our trading strategy:
Company Profile
RIMM was heading towards earnings as it is one of the first to announce, but we were already in some positions taken at 92.30 and we loved the pattern it was setting up because it was making a higher low at the key 50 day EMA, preparing for another move higher.
We put the play on the report on 3-21-08, and on the following Monday (3-24) it gapped higher, making the move we were looking for to move into a new play on the stock. We moved in with some stock positions at 111.25 and some June $110 call options at $14. The stock closed at 111.83 on that session. The next day RIMM added 4.12; it was obviously primed for a move higher. Another $2.20 the next session. The stock was at 118 when some pre-earnings nervousness set in and it dropped 6 clicks on 3-27. Then it started bouncing up and down each session in a $3 range before a $5 run gave it a good position ahead of earnings.
It held most of that gain on Wednesday, and after hours it posted another excellent earnings result. The stock gapped higher Thursday and closed at 122.58. We sold some of our stock positions at 122.32, banking a 9.9% gain. We sold some options at 19.65 for a nice 40% or $565/contract. We also sold some of our prior positions for a 32% gain on the stock and 125% on the options. We kept some positions on the table simply because RIMM is showing itself as an early leader for the techs and it still has upside ahead of it as the rest of the market comes around and plays catch-up.
Always look for the combination of leaders in both fundamentals growth rates and technical pattern that is ready to make the move higher. That duo combines for strong moves and thus strong gains.
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: 4-30-08
STATUS: Ascending base. A series of higher lows up the 90 day SMA (89.71) in HES' 14 week base that formed after a strong December move that saw it run 40 points. It has consolidated that move with this base, and it made another higher low last week. Now just looking for a strong break higher to step into positions in this leader as it moves toward another new all-time high.
Volume: 2.897M Avg Volume: 4.043M
BUY POINT: $95.65 Volume=6M Target=$107.95 Stop=$92.11
POSITION: IGG HS - Aug. $95c (54 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: First week of May
STATUS: Reverse head and shoulders. Solid volume Tuesday as AMX broke higher out of its 16 week base. It then worked laterally to end the week, up and down each session, but holding onto the gains as volume dried up. Good price/volume action as it held the gains. May take another session or two to complete the consolidation, and when it breaks back to the upside we are looking to move into positions and catch this nicely formed pattern on a move to a new high.
Volume: 4.708M Avg Volume: 6.997M
BUY POINT: $66.88 Volume=10M Target=$76.95 Stop=$63.91
POSITION: AMX HM - Aug. $65c (59 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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