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Begin Part 2 of 2
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Hope to see you online!
TOMORROW
Consumer Price Index, Leading Economic Indicators, and the Philly Fed report are out Thursday. Expectations are again for improvement, but we note that the expectations before today's housing starts numbers were lowered a bit after last week's grand expectations were left a bit unfulfilled. The CPI won't likely be able to excite the crowd on its own, but a good LEI a half hour in and a strong Philly Fed at noon could help.
That leaves the open still looking soft with the close at the lows and futures down after hours. We will watch for the S&P to test toward the 200 day MVA early in the session. The Nasdaq's failure was disappointing as we were looking for an upside breakout from the Dow and S&P, but its weakness is not a total surprise. The Dow and S&P have dragged it along thus far, and after Wednesday's selling bout we will see if they can recover on some good volume and set up for another try to the upside.
As noted above, many stocks on the reports are still very strong, holding up well today. We have noted some others breaking down as usual, and we will look at some of those to the downside as well. Today we spend a lot of time on the sidelines letting the action unfold. Tomorrow we are going to be watching again to see how the S&P hands on and if stocks start to recover or start to break down again, signaling a drop to lower levels.
Support and Resistance
Nasdaq: Closed at 1832.87.
Resistance: 1850 was support and after it was broken today, it turned the index back. Then there is 1875, the bottom of the November consolidation. The 200 day MVA (1890.54) is next and what stopped the recent rally attempt. 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: 1840, the early November gap up point may provide some support. After that, it is pretty sparse down to 1800 to 1775.
S&P 500: Closed at 1151.85
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. Before that point there is some resistance at 1183 from March 2000.
Support: 1150 and the 200 day MVA (1145.19). After that, 1125 is the hump in the double bottom, and the simple 50 day MVA (1128.22) and exponential 50 day MVA (1134.79) are converging. 1100 has acted as support as well.
Dow: Closed at 10,501.57
Resistance: The top of the June, July, and August 2001 trading range at 10,600 (10,679 intraday high), is still holding it back. 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 held as support during this consolidation. That is followed by the January high at 10,300. Then the 200 day MVA (9999.57) and 10,000 teaming up together.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
3-19-02
Trade Balance, January (8:30): -$26.9B versus -$25.3B%
FOMC Meeting (2:15): No cahnge in Fed Funds rate (1.75%). Balance of risks shifted to neutral.
3-20-02
Housing Starts, February (8:30): +2.8% to 1.752M actual versus 1.63M expected and 1.721M prior (revised from 1.678M).
Building Permits, February (8:30): +1.8% to 1.752M actual versus 1.65M expected and 1.721M prior (from 1.706M).
Treasury Budget, February (2:00): -61.0B versus -$48.2B prior.
3-21-02
Initial Claims, 3/16 (8:30): 377K versus 377K prior.
CPI, February (8:30): 0.2% versus 0.2% prior.
Core CPI, February (8:30): 0.2% versus 0.2% prior.
Leading Indicators, February (10:00): 0.3% versus 0.6% prior.
Philadelphia Fed, March (12:00): 17.8 versus 16.0 prior.
FOMC Minutes, 1/30 (2:00)
SUBSCRIBER QUESTIONS
Q: You write that companies will be entering their "quiet time." What exactly is "quiet time"? Is it required by law, and if so, for what purpose?
A: Quiet time is roughly two weeks before a company announces its earnings. During that period the company is not supposed to make any material statements regarding the coming earnings that are to be released. It is designed to help avoid undue volatility before the earnings announcement. That is why we see earnings warnings coming out right before the quiet period starts. If the company sees things are going to miss the mark, it may want to do some front end damage control.
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: HRLY blasted out of the recent test of the breakout consolidation, the move we have been waiting for! GE broke support at the 50 day MVA on stronger volume; our target is 36 for the put play. CCK just keeps on climbing (recent bounce from the 18 day MVA).
Target hit Wednesday: ITT (64; +$9.75)
Stop Advisories: RPM (15.25), INVN (43.75)
Stocks/Indexes from Tuesday's report:
OMX: Still nice in the test of the breakout pullback.
TMCS: Tried to move higher after Tuesday's nice 18 day MVA bounce, but with the Nasdaq pulling back was back down for an $0.18 loss. Still above support.
DZTK: Lost the pattern (handle to a 7.5-month base), falling to the 50 day MVA on stronger volume.
ASL: Pennies higher after failing to follow through on Tuesday's move up in the ascending wedge. Volume was higher and still strong with the stock closing at the top of its intraday range. Still like it!
LLL: Fell to the 18 day MVA, just missing our sell point for the covered call on the intraday low. Tight doji on lower volume so it may try to hold here.
Continued Plays:
ADBE: Still consolidating on low volume above support at the short term MVAs. A hold for aggressive buys at 38. Testing the breakout from an ascending wedge, but fell to the 50 day MVA before moving back over the 18 day MVA four days ago.
DJX: Some selling on higher volume (still below average) and a break of the 10 day MVA; can test the 18 day MVA at 104.30.
LPX: Hit the buy point (11.30) on Friday but the stock started selling back Wednesday on strong volume. Closed just under the 10 day MVA (10.99) and will likely test the 18 day MVA at 10.59.
OII: Has moved up the last 4 days after bouncing from the 18 day MVA; the moves are getting smaller with volume rising, so can start a pullback to the 28 range before starting higher again.
Best Plays:
1) SYXI: Ready to try for another breakout!
2) IMH: Tightening up its pattern.
3) CHPC: Ready to move up in the handle.
New plays: Looking at a few smaller stocks tonight. They look good!
SYXI (Ixys Corp--$12.00; +0.15; optionable): Semiconductor
http://biz.yahoo.com/p/s/syxi.html
STATUS: This chip stock has formed a pennant pattern above its 10 day MVA (11.53), a consolidation off a nice breakout over the 200 day MVA earlier this month. That breakout was the result of another pennant that develop between that resistance and the 50 day MVA. The larger picture shows SYXI in a 21-month base with highs near 41, but the stock is off the lows at the $5 level. Volume is falling off in the current pattern as it should, down Wednesday to 57,600 (avg. 155,000), but SYXI bounced from the 10 day, showing it is ready to move once volume surges back up. Looking for a breakout after this 'test', an outlook supported by the huge money flow and buying! Target: 15
BUY POINT: Breakout: 12.54 on volume of 209,000 or higher. Stop Advisory (7%): 11.66
POSITION: Stock and/or July $10 calls to buy (USX GB).
http://www.investmenthouse.com/cd/syxi.html
IMH (Impac Mortgage--$8.82; -0.02; no options): Real Estate
http://biz.yahoo.com/p/i/imh.html
STATUS: A small stock that is in a pennant/ascending wedge pattern; the pennant dates from late December, and since early February the pattern has evolved into an ascending wedge. IMH has been in a super up rend off the December 2000 lows near $2.00, forming the pennant/wedge after a strong breakout from a 5-month flat base last fall. Volume was below average Wednesday (183,100; avg. 221,000), with the stock bouncing up from the 10 day MVA (8.69) as it has for the last six days, the last four days hitting resistance at 8.85. Looking for a breakout as the pattern tightens up! Strong money flow and high relative strength. Target:
BUY POINT: Aggressive: 8.95 on volume of 298,000 or better. Stop Advisory (7%): 8.32. Breakout from pennant: 9.27 on volume of 298,000 or better. Stop Advisory (7%): 8.62
POSITION: Stock.
http://www.investmenthouse.com/cd/imh.html
CHPC (Chippac Inc--$8.25; +0.35; optionable): Semiconductor
http://biz.yahoo.com/p/c/chpc.html
STATUS: This small chip stock is in a cup with handle pattern, and trying now for a move up in the handle. Volume was higher at 351,700 (avg. 537,000) as CHPC bounced from the 18 day MVA, support in the handle at 7.81. Showing huge money flow, we also like the pattern and look for a breakout. In a 19-month base with highs near 19 (the stock is a fairly new issue, August 2000), this 10-week cup is a base within a larger 8-month base. Target: 11.25
BUY POINT: Breakout: 9.36 on volume of 806,000 or higher. Stop Advisory (7%): 87.05
POSITION: Stock and/or July $7.50 calls to buy (AKQ GU)
http://www.investmenthouse.com/cd/chpc.html
Update:
SBUX (Starbucks--$23.86; 0.00): Specialty Eateries
http://biz.yahoo.com/p/s/sbux.html
STATUS: The stock tried to break out of its newly formed ascending wedge pattern Wednesday; it moved above resistance in the pattern (24,29, the March high) to 24.53 but sold back down. Volume was higher at 3.7 million (avg. 3.4 million) on the move, and the stock held above support, the 10 day MVA (23.40) with a tight doji. It is a tombstone with the long tail above it, but if the stock pulls back here, look for support at the 18 day
(23.12); that is at the level of the short up trendline that supports this pattern. Money flow and relative strength are high. Target: 29
BUY POINT: Breakout: 24.39 on volume of 4.6 million. Stop Advisory (7%): 22.68
POSITION: Stock and/or July $22.50 calls to buy SQX GX).
http://www.investmenthouse.com/cd/sbux.html
Put:
ISSX (Internet Security--$25.87; -2.13): Internet Software
http://biz.yahoo.com/p/i/issx.html
STATUS: ISSX broke down from a 7-week head and shoulders pattern, but moved back up (after hitting the February low at 22.21) to test resistance at the 50 day MVA (30.25, currently). It failed to move over that level, and turned back down on Friday selling, pausing the last 2 days to test another level of broken support, the 200 and 18 day MVAs (at the 28.50 range, taken out on Friday's move). It let go Wednesday, falling from the lower 10 day MVA at 28.13 on a sharp rise in volume (3.56 million; avg. 2.7 million). Looking for it to move below the February low; target is 20.
BUY POINT: 25.25 on continued rising volume.
POSITION: July $35 puts to buy (ISU SG).
http://www.investmenthouse.com/cd/issx.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.
MIK ($38.83; +0.03): Still a hold for positions taken at 38.40 for the covered call play. Showed a doji on slightly higher volume; continues to look poised for a pullback. Target is 36.
DGX ($79.37; +0.52): Testing the recent breakout, and the stock may hold at support here. Our target for the covered call play was the 10 day MVA (76.47 at the time the play was written and now at 77.75). Volume was lower with DGX showing a looser doji; it tested down to 78.33 then bounced back up.
UP & COMERS PORTFOLIOS: BBBY, SRCL
BBBY ($32.17; -0.41): Still hanging below the 50 day MVA (32.84) but volume rose Wednesday with BBBY moving down from that resistance. Still above the up trendline, which is at 31.75.
MEMBER PORTFOLIO: CSCO, SEBL, EMLX, BRCM, HDI, BRCD, BUD, AMGN, WMT, ORCL, HB, NOC
WMT ($63.18; -0.28): We discussed over the weekend the possibility that WMT would make a climax run ahead of a correction to the 50 day MVA, after making 5 bounces from the 18 day MVA since January. It gave the strong move on Friday but volume fell back right away and now the stock is holding at the 10 day MVA (62.95). Volume was higher; if the stock can't move up from here it can again test the 18 day MVA (33.65). If it does, chances are it will test the 50 day MVA as well.
SEBL ($31.58; -3.22): Broke the 50 day MVA on strong volume and headed for the 200 day MVA (32.47). It will need to bounce back quickly if it can, but this is some heavy trading on a rumor of a possible valuation downgrade.
BRCM ($34.96; -2.87): Just couldn't muster a move back over the 50 day MVA, and yesterday broke the 200 day MVA, falling further today. Will look at getting back in on a good move back over the 50 day MVA (at 39.70).
AMGN ($62.31; -0.17): Selling back toward the 10 day MVA at 60.78.
BRCD ($23.12; +0.72): Forming a double bottom with the hold at 22.50, but unless the market blasts up, BRCD can hit resistance again at the 18 day or the 50 day MVA (26 or 29 levels, respectively). Once it gets over the 50 day MVA again, it will have broken over its short term down trendline, and we will look at getting back in.
HB ($58.69; -0.06): Moving laterally but below resistance at the 18 day MVA (58.84). Lower support is the 50 day MVA at 58 and an up trendline (Nov/Mar closing lows) that was tested on the intraday low at 58.59. Volume is low, so may be able to break through resistance if it gets stronger volume.
BUD ($51.70; +0.40): BUD has looked good over the last week, not giving huge moves but climbing steadily. However, volume is falling off, so the stock will likely follow suit unless that changes. Can test the range of the 10 day MVA (50.62).
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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