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Begin Part 2 of 2
TEAM TRADES
URS showed one of our favorite patterns: a combination cup with handle breakout followed by an ascending wedge: the cup with handle shakes them out and the ascending wedge builds up pressure for a really strong move higher. We got the first breakout of the cup in December and January. We were then watching for the breakout as the wedge formed and got it back on February 27. It then pulled back to the 18 day MVA last Thursday and bounced on strong volume Friday. Today we got another move higher and were ready to add to positions. 32.55 was the next buy point. Well, it cleared that on the open, running to almost 33. It then peeled down 32.70; they always do after jumping up out of the gates. Volume was decent at 30% of average, but with all of the great volume on the breakout of the cup with handle and then with the wedge, we were just looking for decent volume to get in. We issued the alert, catching on the way back up at 32.80 when the spread was 32.65 by 32.80; we were not going to argue the spread at this point. Turned out fine as the stock roared up to close at 34 on another big volume day. These patterns can lead to very big gains, and we add to the positions when they present themselves while we let them run.
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: BBX broke out of the ascending wedge! STEC gapped to a new high, and NBTY continued its ascending wedge breakout. MPS broke out from its cup!
Stocks/Indexes from the weekend report:
NWK: The pennant remains tight, showing a doji on sharply lower volume.
MPS: Breakout!
PEGS: Continued the pullback to its 10 day MVA, lower volume on the move.
PLCM: Hit the buy point for the put play but closed back up and on the 18 day MVA on lower below average volume. Holding positions.
GE: Gapped back up Monday but is still below the 200 day MVA. Looking for continued weakness and move down to the 50 day MVA.
Continued Plays: Still like GAP (3-06), SBUX, PRIA (both 3-07).
ESE: Moving up from the 18 day MVA for the bounce play. Volume higher but still below average. Hit the aggressive buy point of 38.45 on Friday.
INVN: Moved up to resistance in the ascending wedge (the stock closed at 45.04). Volume was slightly higher, still below average. Buy point remains 47.09 for the breakout; the stock already hit the aggressive buy point at 44.50.
NBTY: Still a buy on the breakout (up to 16.30) from the ascending wedge. Closed at 15.98 as it gapped higher on stronger volume.
Was a subscriber's choice February 7, an ascending wedge pattern in the mid-right side of a 7-month cup base. Moved over some resistance in the pattern Friday (has the lone January intraday high at 15.44 to clear), but needs volume to back it up. Buy point is 15.52 for a breakout.
PPD: Making another bounce from support (10 day MVA). For positions taken on the last bounce at 26.20, a hold for this new run. Volume was lower on the previous bounce (compared to the bounce off the 200 day MVA in February) so we will have to see what kind of volume it can muster on this leg. New buy point is 28 on continued strong volume.
VVUS: Still in the handle to the 6-month cup base. Moved up from support (18 day MVA) but on lighter volume (3-06 report).
Best Plays:
1) VRST: Ready to break out of a cup with handle.
2) ATK: Pulling back on lower volume.
3) LYTS: Nice test of the breakout.
4) SRCL: Consolidating for another move up.
New plays:
VRST (Verisity--$20.69; +1.74; optionable): Software
http://biz.yahoo.com/p/v/vrst.html
STATUS: Trying to break out of a 10-month cup with handle pattern. The stock pulled back a bit far in the handle, testing down to the 200 day MVA, but has made a nice run back up since the first of this month, including today's move. After Friday's low volume pullback, volume was sharply higher Monday (322,400; avg. 262,000) and the stock made nice move, approaching the handle high at 21.25. We will see if it can make it happen! Money flow is strong, and relative strength is breaking out as well. Target: 25
BUY POINT: Breakout: 21.09 on volume of 393,000 or higher. Stop Advisory (7%): 19.61
POSITION: Stock and/or June $17.50 calls to buy (UVQ FW).
http://www.investmenthouse.com/cd/vrst.html
ATK (Alliant Techsystems--$98.50; +0.50; optionable): Aerospace/Defense
http://biz.yahoo.com/p/a/atk.html
STATUS: ATK broke out of a 4-month cup with handle base at the end of February and after making it to the closing high this month at 100.49 is pulling back on decreasing volume in a test. Showing dojis the last 2 days, the stock is holding for now above its 10 day MVA (95.95); volume was lower at 373,300 (avg. 319,300). It looks like it might try to move up from here, but if volume continues to drop it can test back to the 10 day MVA again ahead of a new breakout. Outstanding money flow. Target: 116
BUY POINT: Aggressive: 99.50 on rising volume (400,000 or higher). Stop Advisory (7%): 92.54.
POSITION: Stock and/or May $90 calls to buy (ATK ER).
http://www.investmenthouse.com/cd/atk.html
UNTD (United Online--$7.01; -0.01; no options): Internet Software
http://biz.yahoo.com/p/u/untd.html
STATUS: Moving laterally in a flying plateau pattern, holding above support at 7. Volume fell back below average Monday to 272,700 (avg. 320,136) with UNTD showing a doji at the support. After a continued hold here on continued decreasing volume, looking for a breakout. The stock tried to do so three days ago on a stronger pop in volume, but pulled off the high at 7.59. We are plotting an aggressive buy point below that. If the stock continues to pull back on even lower volume, support is likely at the 10 day MVA (6.74). Outstanding money flow and buying. Target: 9.10
BUY POINT: Breakout: 7.20 on volume of 432,000 or higher. Stop Advisory (7%): 6.70
POSITION: Stock.
http://www.investmenthouse.com/cd/untd.html
Updates:
LYTS (Lsi Industries--$19.79; -0.13; no options): Business Equipment
http://biz.yahoo.com/p/l/lyts.html
STATUS: Still moving in the more or less sideways movement as it tests the breakout. LYTS broke out of a 6-month ascending wedge pattern at the end of February. It is currently squeezing between support at the 10 day MVA (19.63) and resistance at 20. Volume is falling back nicely in the test, and was very low Monday at 22,700 (avg. 58,000) as LYTS showed a doji above the support. We are looking for a breakout. Has excellent money flow and buying. Target is 24.
BUY POINT: Breakout: 20.40 on volume of 78,500 or higher. Stop Advisory (7%): 18.97
POSITION: Stock.
http://www.investmenthouse.com/cd/lyts.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, APPB, IGT.
FRX ($78.00; -0.51): Patience is a virtue; FRX made a strong move up today, gapping above the 50 day MVA on the open, then heading higher from there on strong volume. Upbeat comments from SG Cowen. A strong move up in the flat base.
LLL ($109.18; -3.31): Broke the 18 day MVA on strong volume. LLL can fall to the 50 day MVA at 103, opening things up for a covered call play on long-term holdings. April $100 calls to sell, buy point 108.90 on rising volume.
MIK ($37.02; +0.60): Still climbing, volume strong. It can't continue forever, and when it looks ready to top out, we can look at selling some covered calls if there is enough room after this run.
APPB ($35.25; -1.11): Restaurants sold off today, after we noted on the weekend report that there could be some distribution in the cards. APPB took a hit, selling back to the 50 day MVA on strong volume. Threatening to break here; it has an up trendline at 33.25 if it does so and cannot hold 34 (November high).
IGT ($64.00; -3.85): Heavy selling and a break of the 50 day MVA (65); no news specific to the stock to explain the move. For long-term positions, can look at selling covered calls for a move down to at least 60, but we do not like the higher volume break of the 50 day MVA. April $60 calls to sell; on a 4-point move those can decrease about $2.50 in value for a buy back at the support. Higher volume selling on the down days says the smarter move is to take money off the table here.
UP & COMERS PORTFOLIOS: BBBY, SRCL
SRCL (Stericycle--$66.10; +0.74; optionable): Materials & Construction
http://biz.yahoo.com/p/s/srcl.html
STATUS: SRCL is testing its recent run off of the 50 day MVA (at the time the support was at 57; it is now at 60). Volume has been low on the lateral consolidation, remaining so Monday though slightly higher at 154,500 (avg. is 310,000) with the stock bouncing up form support at 65, a level it has held for the last several days. Can head up from here, so look for a move over the March closing high at 66.98. Showing huge money flow. Our target is 77.
BUY POINT: 67.10 on rising volume (178,000 or higher). Stop Advisory (7%): 62.40
POSITION: Stock and/or May $60 calls to buy (URL EL).
http://www.investmenthouse.com/cd/srcl.html
MEMBER PORTFOLIO: CSCO, SEBL, EMLX, BRCM, HDI, BRCD, BUD, AMGN, WMT, ORCL, HB, NOC
NOC ($108.46; +2.54): Made it back over the 18 day MVA, bouncing from the 50 day MVA. Not a strong move with volume lower on the day, and still has to get over resistance at 110, but something positive.
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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