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Begin Part 2 of 2
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: PPDI hit the buy point for the ascending wedge breakout! UNTD moved up in the flying plateau after hitting the buy point (7.20) Tuesday but pulling back again. After testing the 18 day MVA Wednesday, volume blasted up for the breakout (a buy up to 7.56; closed at 7.28). PEGS got some heavy buying at the 50 day MVA (see below) and blasted off of that support! BBX cleared recent resistance on rising volume (after testing the ascending wedge breakout).
Targets hit Thursday: KSWS (40)
Trailing Stop Advisory: SNS (13.50)
Stocks/Indexes from Wednesday's report:
OII: Still tight in the flying plateau pattern.
SPF: Falling toward the 18 day MVA in the test of the breakout.
PLXT: Still in the handle of the cup base, testing lower to the 18 day MVA. Volume was higher on the move so a hold at the support is critical.
EEFT (put): Did not head lower after breaking the 50 day MVA on Wednesday. Volume headed even higher and the stock broke back over its 50 day and short term MVAs.
ESE: Still holding at the 18 day MVA and showing a hammer doji in the lateral pattern. Looking for a breakout from the support.
Continued Plays: Still like LYTS (3-10), ATK (3-10), NWK (3-09)
CNMD: Looks like it is topping out on the breakout run; churning on high volume.
MPS: MPS is moving laterally the last three days as volume falls back sharply. this is a test of the recent breakout from the 10-week cup. Has tapped near 8 the last three days, so that support can hold, especially with volume continuing to fall. New buy point over 8.25 on strong and rising volume.
PPDI: Closed at 34.51 and remains a buy on the breakout up to 36.32 on rising volume (still strong but down slightly).
RKY: A small move up but volume shot just above average; getting ready for a bounce!
SBUX: Moving up from the 18 day MVA on higher volume. We are looking for a breakout from the 6-week cup with handle.
SIMG: Showing a tighter doji at the 10 day MVA, volume shrinking lower in the test of the breakout. Looks good!
Best Plays:
1) LPX: Testing the breakout.
2) ADBE: Strong earnings can launch a bounce here!
3) PEGS: Making a strong bounce!
4) EMLX: Sold below the 50 day MVA.
New play:
LPX ($10.98; +0.48; optionable): Materials & Construction: Lumber
http://biz.yahoo.com/p/l/lpx.html
STATUS: LPX broke out nicely over its 200 day MVA at the end of February, pulling back now in a test of the move and holding support at the 10 day MVA (10.60). Volume was strong Thursday, bouncing the stock from the 10 day (802,400; avg. 502,400) and we are looking for a continued move out over the March high at 11.25. The stock is in a continued downtrend in its huge base of several years, but recently is off the lows around 6 and the move over the 200 day MVA is positive. We can look for a shorter term trade for now. LPX has strong money flow and good buying. Target: 13.50
BUY POINT: 11.30 on continued rising volume. Stop Advisory (7%): 10.51
POSITION: Stock and/or May $10 calls to buy (LPX EB).
http://www.investmenthouse.com/cd/lpx.html
Revisiting: We keep watching the techs as the Nasdaq consolidates. Some are setting up for moves when the index rallies again.
NVLS (Novellus--$50.06; +0.20; optionable): Semiconductor Equipment
http://biz.yahoo.com/p/n/nvls.html
STATUS: We looked at NVLS March 5 for a possible covered call play, but the stock held at 50 for a pop up to the month's high (54.48) just a few days later. Since then, NVLS pulled back on overall decreasing volume (spiked Wednesday on a doji) and Thursday continued to hold support at the 10 day MVA where it showed another doji. Volume was below average at 5.85 million (avg. 6.9 million). The spike suggests possible upside, which is what we are looking for when the Nasdaq rallies again; ahead of that we expect NVLS to hold support here on continued decreasing volume. The stock is in a large base, recently ranging between the 57-60 and 26 ranges. Strong money flow and decent buying. Looking for a short term play on a move up to the 57 range, focusing on options rather than stock in order to get the best return.
BUY POINT: Aggressive: 51.30 on volume in the range of 7 million. Stop Advisory (7%): 47.71. Breakout: 54.58 on volume of 10.5 million or higher. Stop Advisory (7%): 50.75
POSITION: Stock and/or June $45 calls to buy (NLQ FI).
http://www.investmenthouse.com/ct/nvls.html
ADBE (Adobe Systems--$36.59; -0.94; optionable): Application Software
http://biz.yahoo.com/p/a/adbe.html
STATUS: In regular trading ADBE sold down to the 50 day MVA (36.17) but after hours the stock bounced back to its 18 day MVA (37.75) after the company beat estimates for the second quarter. That move places the stock back at the upper reaches of the recent ascending wedge pattern from which it broke out early this month (covered on the report 3-06). The after hours move does not mean ADBE will open at the 18 day MVA, but we are looking for a bounce at least from the 50 day MVA on the news, to launch a run back up toward the March high (on the breakout) at 41 (initial target). We can get a better return for the short term playing options, so are focusing on buying calls for the move.
BUY POINT: Aggressive: 38 on volume of 4 million or higher. Stop Advisory (7%): 35.34
POSITION: Stock and/or July $30 calls to buy (AEQ GF).
http://www.investmenthouse.com/cd/adbe.html
Update:
PEGS (Pegasus Solutions--$18.07; +1.15; optionable): Business Services
http://biz.yahoo.com/p/p/pegs.html
STATUS: PEGS made a recent run off of its 50 day MVA (now at 16.25) as it broke out of its 18-month cup with handle but when it hit 19 (buy point was 18.21) headed back down from another test of the 50 day. It completed that pullback Thursday and bounced on some strong buying (volume was up to 403,200; average is 194,000), making a solid move back over the short term MVAs. Looking for another run from here for aggressive positions. We plotted a buy point at 19 on the 3-09 report, but that was before this nice move. PEGS has excellent money flow and buying. Target: 22
BUY POINT: Aggressive: 18.30 on continued strong volume. Stop Advisory (7%): 17.02
POSITION: Stock and/or July $15 calls to buy (PUG GC).
http://www.investmenthouse.com/ct/pegs.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, IGT.
MIK ($37.47; +0.62): At the top of its run; volume was lower on the slight gain and MIK is likely to pull back soon. It can find support at 36 on that move.
UP & COMERS PORTFOLIOS: BBBY, SRCL
BBBY ($32.37; +0.30): Moving laterally below the 50 day MVA and above the long-term up trendline as volume slips further below average. We aren't looking at any positions here, but it is an interesting pattern that could result in a breakout over the upper resistance when retail rallies again.
SRCL ($65.27; -0.83): The stock has moved laterally for several days now, testing the recent breakout that took it over the December highs (62.85). A change in the action today: a strong surge in volume that broke SRCL over the most recent highs but the stock pulled back down to close for the loss, still above support at the 10 day MVA. If it does break the 18 day MVA (64.19) can drop to test the December highs, where we would look for initial support. The stock received a "buy" rating from T. Weisel today.
MEMBER PORTFOLIO: CSCO, SEBL, EMLX, BRCM, HDI, BRCD, BUD, AMGN, WMT, ORCL, HB, NOC
EMLX (Emulex--$29.25; -1.83; optionable): Computer Peripherals
http://biz.yahoo.com/p/e/emlx.html
STATUS: The adage is don't short a dull market, and today was dull. EMLX, however, broke the 200 day MVA on strong volume, and from here could fall to an initial target at 25 on continued selling (11.2 million; avg. 9.4 million). Bank of America cut earnings estimates, news that could continue to provide impetus for the drop, so we are considering the put play in that event.
BUY POINT: 29 on continued rising volume.
POSITION: July $40 puts to buy (UMQ SH).
http://www.investmenthouse.com/cd/emlx.html
ORCL ($13.44; -0.45): In regular trading the stock posted a new closing low for the month, selling on higher volume. The company met profit expectations but outlook was negative for Q3.
BRCM ($39.24; -1.00): Slid below the 50 day MVA on even lower volume, support where we expected the stock to hold. Closed just above its 18 day MVA, and has the 200 day MVA below at 38.41).
HDI ($54.70; +0.09): Tightening up in the little ascending wedge, as volume drops lower below average. See the 3-12 report for details (buy point is 55.91).
HB ($58.96; +0.14): Not in a great pattern overall, but has moved over the 18 day MVA after bouncing off the 50 day a week ago. Volume is low in the four-day lateral pattern (four dojis). HB fell out of its pennant pattern 8 days ago to hit the 50 day MVA.
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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