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Begin Part 2 of 3
S&P 500:
Very similar action to the Dow. It has broke over the 200 day MVA (1150.37) and is now attempting to consolidate the move up off of 1075 where it double bottomed. Its resistance is the double tops from December and January (1170 and 1176.55) that roughly mark the bottom of the summer of 2001 trading range. Friday it made a run at them, hitting 1172.76 on the high before reversing. It still closed positive, but well off that intraday high where it found resistance. Again we anticipate the S&P to test down toward the 200 day MVA as it consolidates the move off of 1075 (almost 100 points) for the next run at resistance. After forming the double bottom with handle and breaking out, the S&P is now finishing up the consolidation with a cup with handle. There is still a lot of overhead on up to 1250, but the breakout over the twin tops looks very doable with the improved economic conditions.
Stats: +6.77 (+0.6%) to close at 1164.31.
Volume: NYSE volume backed off once more to 1.421 billion (-6.9%).
The Chart: http://www.investmenthouse.com/cd/$spx.html
THIS WEEK
After last week there is even more economic news, but it starts taking a back seat. Wholesale inventories, retail sales, business inventories, PPI, and Michigan sentiment. Not the same heavy hitters, but important. After such a big week, however, there may be economic news saturation.
The indexes showed some signs of wear Friday even with the gains. They have run far and will need a rest. They started on Thursday but got another injection of economic excitement Friday.
We expect this week to continue the consolidation that is working on the Dow and S&P and that tried to start on the Nasdaq. Thus far it has been orderly when the pullbacks have come with volume contracting.
As the Dow and S&P have started to consolidate we are seeing individual stocks do the same after making good moves and others finally starting to shape up. With the major indexes looking as if they are going to continue to consolidate their moves further, we need to remain patient, let the stocks set up and then make their moves.
Support and Resistance
Nasdaq: Closed at 1929.67
Resistance: Broke the 200 day MVA and is now at the top of the November consolidation at 1934 to 1941. After that is 1980 (the December gap up point) and some minor resistance at 2000. Then the January top at 2098.88.
Support: The 200 day MVA just broken Friday (1905.35). 1875 has acted as support in the past and represents the bottom of the November consolidation range. After that, not a lot of room before 1800.
S&P 500: Closed at 1164.31
Resistance: The December high (1173.62) and the January high (1176.97). That point also marks roughly the lows of summer 2001 consolidation that runs up to 1240.
Support: 1150 and the 200 day MVA (1150.37). After that, 1125 is the hump in the double bottom, and the simple 50 day MVA (1127.78) and exponential 50 day MVA (1124.62) are converging. 1100 has acted as support as well.
Dow: Closed at 10,572.49
Resistance: The top of the June, July, and August 2001 trading range at 10,600 (10,679 intraday high), is still holding tough for now. 10,800 represents some resistance. That is followed by resistance at 11,000 on its way to the May 2001 high at 11,345.72.
Support: 10,400 has been providing support, followed by the January high at 10,300. Then the 200 day MVA (10,023.74) and 10,000. The 50 day MVA (10,025.41) is joining up at that level.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
3-11-02
Wholesale Inventories, January (10:00): -0.5% versus -0.6%.
3-13-02
Retail Sales, February (8:30): 0.3% versus -0.2% prior.
Retail Sales, ex-auto, February (8:30): 0.4% versus 1.2% prior.
3-14-02
Business Inventories, January (8:30): -0.4% versus -0.4% prior.
Initial Claims, 3/9 (8:30): 376K versus 376K prior.
Export Prices ex-ag., February (8:30): 0.1% versus 0.1% prior.
Import Prices, ex-oil, February (8:30): 0.1% versus 0.1% prior.
Current Account, Q4 (8:30): -$101.5B versus -$95.0B prior.
3-15-02
PPI, February (8:30): 0.1% versus 0.1% prior.
Core PPI, February (8:30): 0.1% versus -0.1% prior.
Industrial Production, February (9:15): 0.2% versus -0.1% prior.
Capacity Utilization, February (9:15): 74.3% versus 74.2% prior.
Mich. Sentiment-Prel., March (9:45): 93.0 versus 90.7 prior.
SUBSCRIBER QUESTIONS
Q: Can you please tell me what web site I can go to that will tell me the volume & A/D line during the trading day on the NYSE and Nasdaq?
A: On the web you can get very current data on volume and advancers versus decliners at http://quote.yahoo.com/mo.
THE PLAYS: Best Play THQI announced a split!
BONUS PLAY: Nice breakout by LECO! SVM is still looking good; SJM gapped over the buy point and pulled back, so we will see where it catches support. UPS ran again, and INGR made a nice continuation of its move!
MER (Merrill Lynch--$53.33; +0.54; optionable): Brokerage
http://biz.yahoo.com/p/m/mer.html
STATUS: MER fought back from September lows at 35 to hit 59.32 in January, and then dipped back and formed a double bottom pattern, now trying to form a handle. The low of that pattern was 44, and this week MER showed a lot of strength as it moved back over the pattern center (February high of 50.63), and continued up through its 200 day MVA (52.28). It reached as high at 54.90, tapping its down trendline connecting January 2001 and January 2002 highs. The dip back is holding the 200 day, Friday bouncing slightly from that level, closing with a loose doji on continued strong volume (down sharply to 9.06 million; average 5.68 million). Looks like it is forming a handle, so we will look for MER to hold the 200 day and set up a breakout. Target: 63.
BUY POINT: Over the recent high: 55 on minimum volume of 8.5 million. Stop: 51.15 (7%). Aggressive: A move over 54 on increased volume. Stop: 51.15.
POSITION: Stock and/or July $50 calls to buy (MER GJ).
HIB (Hibernia Corp--$18.87; +0.20; optionable): Banking
http://biz.yahoo.com/p/h/hib.html
STATUS: HIB formed a cup August-December, and followed with a lengthy handle to that pattern. HIB used the support of the 50 day MVA (17.92) in the handle, and the last part of February made a break out of the handle, but volume was never strong. That action is not the best, but HIB is holding up well, pulling laterally this week to form another handle consolidation. It is holding over the 10 day MVA (18.58), testing that level Friday and moving up on increased volume (583,400; average 540,000). Looking for volume to pick up on a breakout. The high (left side of the pattern) is at 19.35. Excellent money flow and good buying. Target: 22.
BUY POINT: 19.07 on volume of 810,000. Stop: 17.73 (7%).
POSITION: Stock and/or July $17.50 calls to buy (HIB GW).
SSYS (Servicemaster--$8.75; -0.05; no options): Computer peripherals.
http://biz.yahoo.com/p/s/ssys.html
STATUS: SSYS is in a two-year cup, and has made a strong surge up the right side from its September lows at 3. During that surge it has made runs followed by consolidations that have tested the 50 day MVA (currently 7.74) or its 18 day. In mid-February SSYS made a strong bounce from the 50 day, hitting a recent high of 9.84, but tightening into a pennant handle. Volume has been strong in the recent pattern, and Friday the stock hit a low of 8.30 (18 day at 8.48) but rallied back to close with a doji on the 10 day. Volume was way up at 174,200 (average 26,300). With the strong run back up to close, we will look for the momentum to continue and push a strong move to breakout. The high in the left side (January 2000) is 13. Good money flow and excellent buying. Target: 12.
BUY POINT: 9.20 on continued strong volume (minimum 75,000). Stop: 8.56 (7%).
POSITION: Stock only.
BVF (Biovail--$46.26; -1.33; optionable): Drugs.
http://biz.yahoo.com/p/b/bvf.html
STATUS: Put. Fell off of double tops in January (57), dropping hard to a low of 40.11 in February. It has come back to challenge its 50 day MVA (47.90), moving over that mark at the end of February but turning quickly, and again this week. Thursday saw BVF try gap over the 50 day and then reverse, and Friday it fell back to close below its 200 day (46.56). Volume was up at 1.7 million (average 1.54 million). Looking for more downside with a run down to 42.
BUY POINT: Perhaps after a test back over the 200 day, a drop through 46 on increased volume.
POSITION: April $50 puts to buy (BVF PJ).
Quick updates prior bonus plays.
CMX - Tried a breakout but pulled back - still looking good.
MDR - Still solid in its pattern.
MKSI - Holding up after the run.
ISLE - Holding support on the test.
DCOM - Ditto.
SHFL - Still could bounce.
IR - Formed a pennant after its run - could move again, but need to watch downside as well.
SVM - Testing the breakout.
IEX - Broke out, but need to watch it as volume was not great.
WTSLA - Could be ready to bounce again.
SEE - Close to the target but could test recent highs.
MAG - Continued good move up but low volume.
MARKET FAVORITES: BRCM made the move! BRKS tried the move but pulled back; however, it is still set up nicely. AMAT continues to blast up toward the target.
1) MERQ - Looking to break over recent highs
2) MANU - Strong reversal to the upside
3) XLNX - Making a strong run
MERQ (Mercury Interactive--$38.98; +2.16; optionable): Software.
http://biz.yahoo.com/p/m/merq.html
STATUS: This week MERQ finally managed to make it past its 200 day MVA (37.11), moving back up from recent lows (32-34) this week on good volume. It tapped up to 40.22 at its high Tuesday, and bounced back up Friday after a brief dip back below the 200 day. Tuesday's high just tapped over the January top, but the pullback was rather light. Friday's move up was on light volume as well (3.44 million; average 3.69 million), and we are looking for a strong volume surge to carry MERQ over its recent highs as it resumes its gradual upward trend, which has leveled off since its mid-January drop. However, it has made higher lows since then, and could be ready to make a run. Target: 48.
BUY POINT: 40.32 on volume of 4 million or better. Stop: 37.50.
POSITION: Stock and/or July $35 calls to buy (RQB GG).
MANU (Manugistics--$19.42; +2.81; optionable): Software.
http://biz.yahoo.com/p/m/manu.html
STATUS: MANU was a put play on its recent downtrend, but has managed a turnaround with the market that has been quite impressive, although killing any remaining puts. However, when a play turns on us, we get our money off the table and see if it is worthwhile to flip it. Monday it made a huge gap on a better outlook, making it back over the 50 day MVA (16.39), and after a test back to the 50 day this week, the stock shot up again Friday, taking out its short-term down trendline (17) on big volume (7.07 million; average 3.46 million). A lot of momentum, and we will look at taking a ride up with MANU, watching the recent high (late December) at 22.70 on the way to a target of 24.
BUY POINT: In a continued rally, a move over 20 with continued strong volume. Stop: 18.69 (7%). If we get a rest in the market, we are looking for MANU to hold 18-18.50, and watch for a strong move back over 19. Stop: 17.76 (7%).
POSITION: Stock and/or July $17.50 calls to buy (ZUQ GM).
XLNX (Xilinx--$45.80; +3.06; optionable): Semiconductor
http://biz.yahoo.com/p/x/xlnx.html
STATUS: Has really come back strong, taking out its short-term down trendline (from the January high of 47.16), and now challenging that high. XLNX had made a nice, steady trend up since September, but eased back the last couple of months, breaking down out of a head and shoulders but catching itself at 33. It made a strong move through its 200 day and 50 day MVA's (38.06 and 39.76), slowing toward the end of the week but getting a strong hit of volume as it moved Friday (12.2 million; average 8.97 million). Looking for it to take out recent high. Target: 57.
BUY POINT: 47.26 on continued strong volume. Stop: 43.95 (7%).
POSITION: Stock and/or June $45 calls to buy (XLQ FI).
PRE-ANNOUNCEMENT PLAYS FOR THIS WEEK: After DRI's announcement, no more scheduled for this week.
NEW PRE-ANNOUNCEMENT PLAY:
LE (Lands' End--$52.60; +1.72; optionable): Catalog & Mail Order. Researching an announcement date.
http://biz.yahoo.com/p/l/le.html
STATUS: LE blasted up in November from near 30 to hit the recent high of 53.38. It has since pulled laterally, forming an ascending wedge. LE held the 50 day MVA (48.83) on its recent moves down, making higher lows as it formed up the wedge. It is challenging the high in the pattern, making a solid move Friday on higher though still below average volume (175,700; average 228,000). A good pattern, and we are looking for the breakout. Target: 62.
BUY POINT: 53.48 on volume of 310,000. Stop: 49.74 (7%).
POSITION: Stock and/or June $50 calls to buy (LE FJ).
PRE-ANNOUNCEMENT BEST PLAYS:
1) DRYR - Still in a nice handle
2) LSTR - Good-looking test
3) KRI - Holding in the pennant
4) BER - Could be ready to bounce again
5) IFIN - Strong move
6) ESI - Trying to form a good handle
7) RUS - Looking for a breakout from the consolidation
8) CYN - Holding up in the pattern
9) MUR - Pulled back and needs to set up again
DRYR (Dreyers Grand Ice Cream--$43.42; +0.25; no options): Forecast to announce a split with earnings on 4-24-02 before the open.
http://biz.yahoo.com/p/d/dryr.html
BACKGROUND: Last announced a 2:1 split on 10-27-97 at a price of $42. Before that it announced in October 1990 at about the same price range. The annual shareholder meeting was on 5-9-01 at which time no additional shares were authorized. The company has sufficient shares for a 3 for 2 split.
STATUS: Continues in its handle. DRYR is in a short but nice 'flying w' double bottom pattern, and has been dipping back in a handle for better than a week. Friday it continued to hold the 10 day MVA (43.11) as volume dipped back again, to 74,100 (average 257,400). Good action, and we will continue to look for a volume surge to take DRYR to the breakout. Friday the stock reached up to 44.09 before pulling back. Good money flow and buying. Target: 50.
BUY POINT: 44.98 on volume of 390,000. Stop: 41.83. Aggressive: Over 44 with volume of 300,000 or better. 41.50.
POSITION: Stock only.
LSTR (Landstar System--$87.94; -0.34; no options): Researching a new date.
http://biz.yahoo.com/p/l/lstr.html
BACKGROUND: Based upon our research it does not appear that LSTR has ever split its stock. The annual shareholder meeting was on 5-16-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: Nice test of its recent breakout. We took LSTR on its January run, then exited as it started to drop (eventually hitting through its 50 day MVA down to 77), and since then we kept tabs on it on the watchlist. It came off the watchlist as it broke to a new high, Monday getting an infusion of volume as it moved past the prior top at 87.35. The last four sessions LSTR has tested back toward the prior high with consecutive dojis, and on Friday volume shot back up to 79,700 (average 64,600). With the low volume pullback and doji holding over the prior high, we are looking for LSTR to bounce and head up to 100.
BUY POINT: A move over 89 on continued strong volume (minimum 70,000). Stop: 84.50.
POSITION: Stock only.
KRI (Knight-Ridder--$66.96; -0.55; optionable): Newspapers. Forecast to announce a split on 4-24-02 before the open. There is also the shareholder meeting the next day at 9:30 PT.
http://biz.yahoo.com/p/k/kri.html
BACKGROUND: Last announced a 2:1 split in July 1996 at a stock price of approximately $70. The company has sufficient shares for a 2 for 1 split.
STATUS: Dipped back again in the pennant pattern, but volume remained light (330,400; average 405,100). It is still holding the pattern support at the short-term MVA's (10 & 18 day at 67.04 and 66.47, respectively). A nice pattern, although we know that pennants are prone to go either way (as HB showed). Looking for the strong breakout to the upside. Target: 80.
BUY POINT: 68.35 on volume of 540,000. Stop: 63.57. The move to a new high is 68.83.
POSITION: Stock and/or July $65 calls to buy (KRI GM - under 50 open interest).
BER (W.R. Berkley--$55.60; -0.20; optionable): Property & Casualty Insurance. Researching a new announcement date.
http://biz.yahoo.com/p/b/ber.html
BACKGROUND: Based upon our research it does not appear that BER has ever split its stock. The annual shareholder meeting was on 5-15-01 at which time no additional shares were authorized. The company has sufficient shares for a 2:1 split.
STATUS: BER has been somewhat erratic but is trending up steadily since making a strong move up from the bottom of its base (48, in mid-January). BER has bounced up along the short-term MVA's, catching the 10 day MVA (55.29; 18 day at 54.26) on its dip in the latter part of this week. It's prior bounce generated a good move but volume was weak, and BER immediately retreated, but this time around the pullback has been more orderly, and the stock has shown consecutive loose dojis after tapping the 10 day at its intraday low. Looking for BER to make another bounce, with strength behind it. We are ultimately targeting 64, but on a play on the bounce we will see how it handles the high of 58.40 (from November). Good buying.
BUY POINT: A move over 56.20 on volume of 150,000 (128,000 Friday, the average). Stop: 54.
POSITION: Stock and/or July $50 calls to buy (BER GJ - no open interest; plenty at the $55 strike).
IFIN (Investor's Financial Service--$76.04; +2.91; optionable): Looking at an announcement on 4-16 with earnings or with the 4-23 shareholder meeting.
http://biz.yahoo.com/p/i/ifin.html
BACKGROUND: Last announced a 2:1 split on 5-15-00 with a board meeting. The stock price was $82. The annual shareholder meeting was on 4-17-01 at which time authorized shares were increased.
STATUS: IFIN dropped to the watchlist for a while after falling off of double tops in January, but after testing its 200 day MVA (66.10), is has come back. The move up has not been overly impressive, showing light volume as it moved back up on those double tops, forming a cup, but Friday we saw an infusion of volume as IFIN blasted over the former tops (399,700; average 199,400). A strong move, but we are still a bit wary after the low volume ascent, and IFIN faces resistance from March, April and July highs at 80. We will see if the strength can continued from here, as we know that IFIN can really fly when it gets going, or if IFIN can successfully test its recent highs at 74-75. An aggressive play, with a target at 86.
BUY POINT: Aggressive: A buy on the breakout to 78, with continued strong volume. Stop: 72.50.
POSITION: Stock and/or July $70 calls to buy (FLQ GN - low open interest).
ESI (ITT Educational Services--$44.89; +1.11; optionable): Education & Training. Working on a date.
http://biz.yahoo.com/p/e/esi.html
BACKGROUND: Based upon our research it does not appear that ESI has ever split its stock.
STATUS: Tried to break out last week from its 8-month pattern (a very awkward cup with handle - awkward because of the September drop), but there was not much behind the move, and it could not sustain momentum. However, ESI has held on pretty well, dipping Thursday below the prior handle high (44.25), but holding the 18 day MVA (43.54) and recovering a bit Friday. Volume continues to be low as ESI consolidates (113,200 Friday; average 138,000), and we are looking for the consolidation to continue to shape up, holding support and setting up a breakout. Target: 52.
BUY POINT: 45.45 on volume of 210,000. Stop: 42.27.
POSITION: Stock and/or July $40 calls to buy (ESI GH - no open interest).
End Part 2 of 3
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