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Begin Part 2 of 2
THE PLAYS:
All prices reflect prices at the close on Friday.
SOME LEADERS TO WATCH:
A New Play:
JNPR (Juniper Networks--$136.19; +8.19; optionable (JUY)): Computer hardware
http://biz.yahoo.com/p/j/jnpr.html
STATUS: Turned back down in its ascending wedge pattern after the stock opened above the 50 day MVA (140.69) at 144.56, the upper level of the pattern. Volume was stronger on the move down (26.6 million; avg. 15.6 million), not what we like to see, but look for the stock to hold support at the 18 day MVA (126.52), if it doesn't stop at 135-136 (several prices in that range can support the stock). 200 day is at 148.55.
BUY POINT: On a move back up from here or 125 on continued rising volume.
POSITION: Stock and/or April $35 calls to buy (JUY DE).
Continued:
AMCC (Applied Micro Circuits--$80.38; +10.00; optionable (AZV)): Semiconductor
http://biz.yahoo.com/p/a/amcc.html
STATUS: Gapped higher on strong volume (25.8 million; avg. 16.2 million) on the good earnings report and moved up from there (opening price 78.19), breaking resistance at 80. Looks good for a continued move up as volume remains strong, though on a pullback (if the early move up peters out) the 80 level can offer support. AMCC broke over its down trendline (connecting October and December highs) on the bullish move, and has worked itself through a substantial amount of overhead supply from the November low of 45.88. Up almost $2 after hours, at the time of this writing.
BUY POINT: Aggressive: On a move on continued strong volume.
POSITION: Aggressive: Stock and/or April or May $80 calls to buy (AZV EP).
EMLX (Emulex Corp--$97.19; +9.94; optionable (UEL)): http://biz.yahoo.com/p/e/emlx.html
STATUS: Broke clear of everything stacked up the last three months as stronger volume (average, at 7.4 million) popped the stock to a new high for January. The stock is finally looking good to complete its 10-month base, and for a continued move up tomorrow on the momentum, and on expectations of earnings (out after the bell Thursday). Look for stronger volume on that move. EMLX shows strong money flow and high relative strength, in addition to buying that has turned nicely positive. Support in the 93.44 range on any pullback after a initial move higher in the morning.
BUY POINT: Aggressive: On a continued move up on higher volume (above average).
POSITION: Aggressive: Stock and/or April $90 calls to buy (UEL DR). The April $95 options were not listed at the time of this writing. Please check with your broker in the morning.
Best Plays: We are focusing on those sectors that should do well in Fed rate cutting.
1) SUB: Looks ready to bounce back; good earnings reported this morning.
2) PCSA: Ready to move but needs volume.
3) MCD: Moving toward a breakout.
4) SWBT: Sitting on a trendline with earnings out before the bell.
5) AAS: Ready to move up from here on stronger volume.
6) KEI: Breaking out of the ascending wedge; earnings out before the bell.
7) TXN: Moving up in the pennant on good volume.
8) NATI: Earnings are out tomorrow, so looking for a move up on good news.
9) AZO: Breaking out and still a buy.
10) Keep an eye on: LEH, MER.
New Plays:
READY TO BREAK TO A NEW HIGH:
Continued Play:
FITB (Fifth Third Bancorp--$57.56; +1.15; optionable (FTQ)): Regional Bank (Midwest)
http://biz.yahoo.com/p/f/fitb.html
STATUS: Matched earnings estimates Tuesday, and the stock responded with a move back over the 18 day MVA (57.29) on continued strong volume (down slightly at 2.8 million; avg. 2 million). Look for the stock to hold support here for a move up in a market rally. Reached a January 4 high of 61.31. Has pulled below the October top at 57.88. so want to get a quick move back up. Strong money flow and buying.
BUY POINT: Aggressive: On a move up from here on stronger volume.
POSITION: Stock and/or May $55 calls to buy (FTQ EK).
BREAKOUTS:
New Play (from the weekend):
BJ (BJ's Wholesale Club--$39.75; +0.12; optionable (BJ)): Discount stores
http://biz.yahoo.com/p/b/bj.html
STATUS: Pulling back from the Friday breakout move (reached a high of 40.69) on steadily declining volume (7 million; avg. 477,000). The stock has pulled back below the buy point of 40.13, so we want to see a move back up quickly. The stock opened at 39.63, above a couple of recent matching highs at 39.50, but on a move below that, the stock can drop to the 10 day MVA (38.83). Continued strong money flow and high relative strength, and good buying.
BUY POINT: On a move up from 38.83 or better, on rising volume.
POSITION: Stock. March $35 options (BJ CG) too few open interests (10).
TESTS OF THE BREAKOUT: Some of these stocks are moving back on low volume to test the breakout. We often take profits on option plays when they start to pullback on the breakout move and then get back in when the stock bounces up off of the breakout point. This second ove is where some of the biggest gains are made.
New Play (from the weekend):
SUB (Summit Bancorp--$41.31; -0.75; optionable (SUB)): Regional banks
http://biz.yahoo.com/p/s/sub.html
STATUS: The stock reported earnings before the bell Wednesday, beating estimates; however, that was not reflected in the stock's movement. SUB pulled back to the 10 day MVA, support at the base of the ascending wedge pattern that is functioning as a test of the breakout (the pattern is more like a pennant now). Volume was nicely lower on the move, at 522,400 (avg. 819,000), so we are looking for a bounce back up. Excellent money flow and buying.
BUY POINT: Aggressive: On a bounce from here on stronger volume. Breakout: 43.69, on volume of 1 million or better.
POSITION: Stock and/or April $40 calls to buy (SUB DH).
Continuing Plays:
PCSA (Airgate Pcs Inc--$47.81; +3.31; no options): Telecom services
http://biz.yahoo.com/p/p/pcsa.html
STATUS: Moving up after a two-day pullback on a test of the breakout. Volume dropped well below average on the move up, however (75,300; avg. 193,000), so we want to see a return to above average volume to sustain a move up. The 200 day MVA is at 51.25.
BUY POINT: On a move up from here on volume of 102,000 or better.
POSITION: Stock.
XOXO (Xo Communications): Has been moved to the Basing/Trading Ranges section, as it is now in a cup with handle pattern.
WEDGES, PENNANTS, and FLYING PLATEAUS (AND FLAGS): These are some of our favorite patterns as the moves can be explosive. In this market, however, we need to see the move on the breakout on strong volume.
Wedges:
New Play (from the 1-16 update):
MCD (Mcdonalds Corp--$34.69; +0.56; optionable (MCD)): Restuarants
http://biz.yahoo.com/p/m/mcd.html
STATUS: Followed up on Tuesday's move up in the ascending wedge pattern, closing at the pattern high of 34.69. Continue to look for a breakout as the stock approaches the buy point on the good volume (up to 5.2 million; avg. 4 million). Strong money flow and high relative strength.
BUY POINT: 34.82, on volume of 5.4 million or better. Remains a buy on the breakout up to 36.56.
POSITION: Stock and/or March $30 calls to buy (MCD CF).
New Plays (from the weekend):
CTX (Centex Corp--$41.06; +0.06; optionable (CTX)): Materials and construction
http://biz.yahoo.com/p/c/ctx.html
STATUS: Broke out of the ascending wedge Tuesday on good volume, and tried to cap the move Wednesday but managed only a small move up as volume dropped back, still high at 807,600 (avg. 429,000). Look for a test of the buy point now (40.44) on a pullback. Strong money flow and high relative strength (and buying has turned positive). Earnings are out January 23.
BUY POINT: 40.44, on volume of 644,000 or better.
POSITION: Stock and/or April $35 calls to buy (CTX DG).
SWBT (Southwest Bancorp of Tx--$41.69; -3.00; optionable (ZRQ)): Regional: Southwest
http://biz.yahoo.com/p/s/swbt.html
STATUS: Dropped from the tight end of the ascending wedge pattern on a move below the 18 day MVA (42.13) as volume pulled back below average to 210,900 (avg. 250,363). The stock is sitting on the up trendline (connects November and January lows), so look for a move back up on stronger volume. Earnings are out before the bell tomorrow morning; good news can boost the move. Money flow remains strong and buying positive.
BUY POINT: Over 41.13 on average or better volume.
POSITION: Stock and/or May $45 calls to buy (ZRQ EH).
AAS (Amerisource Health Corp--$49.00; +0.12; optionable (AAS)): Drugs wholesale
http://biz.yahoo.com/p/a/aas.html
STATUS: The stock is holding above support (10 day MVA, tested on the low of 48.75) as volume declines further below average (368,500; avg. 617,000). A move up from here will move price closer to the upper level of the ascending wedge pattern (high is 53.69). Looks ready for the move up on a volume surge. High relative strength. Earnings Feb. 1.
BUY POINT: Aggressive: Up from here on rising volume. Breakout: 53.75, on volume in the range of 833,000 or better.
POSITION: Stock. May $45 and $50 options had insufficient open interests (too illiquid for this stock).
Continued Wedge Plays:
ORCL (Oracle Corporation--$33.25; +1.44; optionable (ORY)): Software
http://biz.yahoo.com/p/o/orcl.html
STATUS: Just can't get what it needs to break out of the ascending wedge pattern. The stock bounced from the 10 day MVA (31.87) on a gap up on stronger volume (52.5 million; avg. 46 million), but after reaching a high of 34.06, pulled back to close in a tight doji above 33.06, a price hit the two previous sessions. Look for support there until the stock can break higher; the intraday high tapped near resistance (34.09 and 34). 200 day MVA is at 35.95.
BUY POINT: Over 34.09, on continued rising volume.
POSITION: Stock and/or March $30 calls to buy (ORY CF).
KEI (Keithley Instruments Inc--$52.25; +3.87; optionable (KEI)): Electronics (scientific and technical instruments)
http://biz.yahoo.com/p/k/kei.html
STATUS: Breaking out of the ascending wedge (buy point 51.38) on strong volume (649,700; avg. 503,409). The company reiterated its guidance for sales growth in the coming year. Closed just under the 200 day MVA (52.36) after pulling off the high of 53.81. Want to see the stock continue this move and clear the resistance, and a good earnings report (before the bell in the morning) can support that move. Money flow and relative strength continue to improve, along with buying.
BUY POINT: Remains a buy on the breakout up to 53.95 (clear that 200 day), on continued strong volume.
POSITION: Stock. April options have insufficient open interests for the stock.
Pennant:
New Play (from the 1-16 update):
TXN (Texas Instruments Inc--$50.56; +2.87; optionable (TNZ)):
http://biz.yahoo.com/p/t/txn.html
STATUS: Moved back up in the pennant on strong volume (15.4 million; avg. 11.6 million), showing a loose doji as the stock pulled off the high of 51.88. Look for a continued move up on the strong volume. Pattern high is 54.69. On a pullback, support is at the 10 or 18 day MVAs at 48.26 or 47.84, respectively.
BUY POINT: Aggressive: On a continued move up from here on rising volume. Breakout: 54.82, on volume of 15.5 million or better. A buy on the breakout up to 57.56.
POSITION: Aggressive: Stock and/or April $50 calls to buy (TNZ DJ). Breakout: Stock and/or April $50 calls to buy. April $55 options were not listed at the time of this writing. Please check with your broker in the morning. (TNZ DK).
BASING/TRADING RANGES:
LTD (The Limited Inc--$17.44; 0.00; optionable (LTD)): Retail
http://biz.yahoo.com/p/l/ltd.html
STATUS: Pulling back in the handle of a double bottom pattern at the bottom of its 10-week base, the stock showing a doji above support (18 day MVA at 17.01). Volume was higher and above average at 3.5 million (avg. 2.2 million); that is not what we like on handles. Thus we have to be very careful and see a very strong breakout move. The doji indicates a move up, however. The 50 day MVA is at 18.80.
BUY POINT: 18.38, on continued strong volume.
POSITION: Stock and/or May $17.50 calls to buy (LTD EW).
New Plays (from the weekend):
TGP (Georgia-Pacific--$31.63; +0.19; no options): Materials and construction
http://biz.yahoo.com/p/t/tgp.html
STATUS: Broke out of its cup-with-handle pattern Tuesday, and after testing back to breakout levels today, made a continued, though modest, move up. Volume was not at the levels we would want for a breakout, coming in just above average on Tuesday's action and down today at 107,100 (average 167,300). We will see if it can hold up, looking for a volume surge on a continued move up, or watching for a retreat on low volume to hold the 31 level. Earnings are out January 26. Basic materials usually perform well when the Fed cuts rates.
BUY POINT: From here: Aggressive, looking for a move on volume of 250,000. If we don't get the volume, no thanks. Pullback: A move up after a pullback that holds at 31.
POSITION: Stock.
NATI (National Instruments Cp--$50.97; +0.09; optionable (SJQ)): Computer hardware
http://biz.yahoo.com/p/n/nati.html
STATUS: The stock is in the handle of a 9-month base (prior high 59.50), and the handle is an ascending wedge being formed on overall low volume. The stock tapped 49.88 at its low today, holding over the 18 day MVA (49.59) and pulling back up for a doji. Looking for a break over the handle high is 53.13. Earnings are reported after the bell Thursday. The stock was added to the S&P 400 index as of December 20.
BUY POINT: Aggressive: Over 52.13 on increased volume (down to 143,000 today; average 224,000). Breakout: 53.26, on volume of 351,000 or better.
POSITION: Aggressive: Stock and/or June $50 calls to buy (SJQ EJ) (low open interest, so use care with calls). Breakout: Stock and/or June $50 calls to buy (SJQ EJ).
LOW (Lowe's Companies Inc--$48.13; -1.37; optionable (LOW)): Retail
http://biz.yahoo.com/p/l/low.html
STATUS: Pulled back again Wednesday toward the lows in the handle to its 17-week cup-with-handle basing pattern. The selling was on light volume, coming in at 1.96 million (average 2.37 million), so we will see if the stock can hold here for a move back up. The handle high is way up at 55.50, but we will see if we can get a move up toward that level to play. Still showing high money flow and good buying. Another stock that should perform well with Fed rat cuts.
BUY POINT: Aggressive: On a move back over 50 on increased volume. Breakout: 54.63, on volume of 3.6 million or better.
POSITION: Stock and/or April $45 or $47.50 (LOW DI or DW) calls to buy.
AZO (Autozone Inc--$29.56; +0.56; optionable (AZO)): Auto Parts
http://biz.yahoo.com/p/a/azo.html
STATUS: Broke out of the handle to its nine-month base, hitting our buy point with solid, sufficient volume (724,800; average 434,400). The move we were looking for, and we will look for more. Still a buy up to 30.45. Strong money flow, relative strength and buying.
BUY POINT: A continued move on solid volume.
POSITION: Stock and/or March $25 calls to buy (AZO CE).
TGT (Target Corporation--$35.81; -0.07; optionable (TGT)): Discount stores
http://biz.yahoo.com/p/t/tgt.html
STATUS: Slowed today after making consecutive moves up in its handle from support at its 18 day MVA (33.83), showing a doji. Looking for a move toward the handle high of 38 for a breakout from the 9.5-month base (prior high 39.19). A good-looking pattern but we could get a pullback to support at the 10 day MVA (34.63). High money flow and relative strength, and positive buying.
BUY POINT: Aggressive: On a move up after a lower-volume (5.48 million; average 4.75 million) pullback to the 34-35 range. Breakout: 38.13, on volume of 7 million or better.
POSITION: Aggressive: Stock and/or April $30 calls to buy (TGT DF). Breakout: Stock and/or April $35 calls to buy (TGT DG).
TLB (Talbots Inc--$44.31; -5.13; optionable (TLB)): Retail
http://biz.yahoo.com/p/t/tlb.html
STATUS: Fell hard out of its short cup with handle today, closing back below its 50 day MVA (44.92). Volume was way up on the selling, coming in at 1.1 million (versus the average 444,000). We will leave it alone for now.
Continued Basing Plays:
XOXO (Xo Communications--$24.63; +0.63; optionable (QNF)): Domestic Telecom
http://biz.yahoo.com/p/x/xoxo.html
STATUS: Formerly in an ascending wedge pattern (removed from that section). Reached a high of 26.50 before moving down to close near the low (24.12) on strong, above average volume (8.6 million; avg. 6.2 million). Now in a cup with handle pattern and testing lower support in the handle, the stock's down trendline (connecting March, September and November highs). That line was broken on the breakout move (from a wedge). Look for a move up from here, or from another test of the support (reinforced now by the 10 day MVA at 23.13). Shows excellent buying. Breakout high is 27.
BUY POINT: On a move back up from the 24 level (or better), on continued rising volume.
POSITION: Stock and/or April $20 calls to buy (QNF DD).
From the 1-16 update (C):
C (Citigroup--$53.81; -0.88; optionable (C)): Bank
http://biz.yahoo.com/p/c/c.html
STATUS: Pulled back on lower volume (13.5 million; avg. 13.7 million), the stock bouncing up and down in a trading range the last three days as it moves in a large ascending wedge pattern. Volume remains at average levels for over a week in the recent consolidation; look for a bounce back up on stronger numbers. The trading range is serving as a rather volatile handle to the stock's 4.5-month base (judging from the lower volume. Look for the breakout over the handle high of 57.38 on stronger volume.
BUY POINT: Aggressive: On a move up from here or the 10 day MVA (53.50) on rising volume. Breakout: 57.51, on volume of 18.5 million or better. Remains a buy on the breakout up to 60.39.
POSITION: Aggressive: Stock and/or March $50 (C CJ). Breakout: Stock and/or March $55 calls to buy (C CK).
LEH (Lehman Bros--$78.88; +1.57; optionable (LES)): Brokerage
http://biz.yahoo.com/p/l/leh.html
STATUS: The stock has edged back up since pulling back from last Wednesday's breakout move, reaching up to a high of 82 today before pulling back to close. Volume was up (3 million; average 2.37 million), but it just could not make the move. We look for a gradual pull back on lower volume, rather than a gradual push up. We will see if the stock pulls back, perhaps to the 10 day MVA (75.11), for a strong surge back up. Continues with high money flow and relative strength.
BUY POINT: Pullback: A move up after a lower-volume pullback to the 75 level. Breakout: 81.13, on volume of 3.5 million or better.
POSITION: Aggressive: Stock and/or February $70 calls to buy (LEH BN). Breakout: Stock and/or April $77.50 calls to buy (LES DW).
MXT (Metris Companies Inc--$28.75; -1.19; optionable (MXT)): Credit Services
http://biz.yahoo.com/p/m/mxt.html
STATUS: Moved back in the handle to its double-bottom pattern, dropping back after the release of earnings this morning. The stock closed just over its 50 day MVA (28.67), dropping back on very heavy volume (1.84 million; average 646,300) after tapping up to 31.94 at its high. The poor reception to the earnings news does not bode well for a move back up, but we will see how it shakes out. Not our first choice with all the high volume.
BUY POINT: Breakout: 32.38, on continued strong volume.
POSITION: Stock. April options had insufficient open interests (too illiquid for this stock).
MER (Merrill Lynch & Co--$74.56; +0.93; optionable (MER)): Brokerage
http://biz.yahoo.com/p/m/mer.html
STATUS: The stock continues to try and breakout of its handle, and MER has hit our breakout (buy) point the last two sessions, but volume has not quite reached our minimum for a breakout (6 million today; we were looking for 1.5 times the average of 4.6 million, or 6.9 million. The gradual push up is not the best handle pattern, but we will keep our eyes on it and also see if we get a pullback and explosive move. Excellent money flow and high relative strength.
BUY POINT: Breakout: 76, on volume of 6.9 million or better. Pullback: A move up after a lower volume pullback to the 72 level.
POSITION: Breakout: Stock and/or April $70 calls to buy (MER DN). Pullback: Stock and/or April $70 calls to buy (MER DN).
JPM (J.P. Morgan & Co--$53.00; -0.19; optionable (JPM)): Banking
http://biz.yahoo.com/p/j/jpm.html
STATUS: Has pulled back since its breakout move last Thursday, holding over its pre-move closing levels in its handle pattern (to a cup, going back to September, with a high of 57.50). The stock came out with earnings before the open that were generally characterized as disappointing, but the market did not punish the stock as it inched back today, showing a tight doji. The pattern indicates that the stock might again be ready to spring up and break out, but the news counsels otherwise. An aggressive play, and we will insist on breakout volume on the move up (10.3 million today; average 9.2 million).
BUY POINT: Breakout: 54.83, on volume of 14 million or better.
POSITION: Stock and/or March $45 or $50 calls to buy (JPM CI or CJ).
PUT PLAYS: Still looking at some defensive stocks for possible moves down as the techs rally. These plays are on some defensive stocks that look ready to move back down from resistance levels.
Continued Plays:
UNH (Unitedhealth Group Inc--$52.69; -1.00; optionable (UNH)): Health care plans
http://biz.yahoo.com/p/u/unh.html
STATUS: Continued down Tuesday as anticipated, dropping through its recent lows and touching down to 52 at its low. Volume was sharply up on the selling, which is what we were looking for (2.9 million; average 4.9 million) as the stock hit our buy point. On continued high volume selling that takes the stock through the 52 level, a continued put play. Before the recent drop the stock had been on a steady climb, so there are intermittent levels of possible support, with the 200 day MVA below at 46.23.
BUY POINT: On a move through 52 on continued strong volume on the selling.
POSITION: February $55 or $57.50 puts to buy (UNH NK or UNH NY).
BMY (Bristol-Meyers Squibb Co--$66.00; -1.94; optionable (BMY)): Drug manufacturer
http://biz.yahoo.com/p/b/bmy.html
STATUS: Reached up and closed over its 18 day MVA (67.32) Tuesday, but volume weakened on that move and the stock turned back down today, closing back below its 50 day MVA (66.30) with higher, above average volume on the selling (5.28 million; average 4.9 million). At its low the stock tapped 65.13, and we will continue to look for a move below 64, with stronger volume on the continued selling.
BUY POINT: A move below 64 on increased volume.
POSITION: February $70 puts to buy (BMY NN).
Good Investing!
Your Technical Traders Report Team
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 in 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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