Aircraft Pushes Durables Higher
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
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Weekend Newsletter for
March 26, 2006
Table Of Contents 1) MARKET SUMMARY 2) PRE-SPLIT PLAY 3) TECHNICAL PLAY 4) COVERED CALL PLAY
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http://www.investmenthouse.com/1splitnotification.htm”>Stock Split Notices http://www.investmenthouse.com/1questions.htm”>Investing Q & As http://www.investmenthouse.com/1glossary.htm”>Glossary
1) MARKET SUMMARY > >From “The Daily” at InvestmentHouse.com
Market closes the week quietly but on the upside, capping a solid consolidation move.
– Another nice midday shakeout and afternoon recovery.
– New home sales plunge as more recent data tells of continued decline.
– Aircraft pushes durables higher, but without them they tank.
– Why does the Senate want to raise our cost of living while lowering our standard of living?
– Market just about set for another breakout attempt just as FOMC meets.
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Market Summary (continued)
Once more stocks were challenged mid-session as an early gain was given back, but once more they held near support and rebounded for a positive close. That continued the nearly weeklong consolidation move that saw lower intraday dips and late recoveries, action that works to shake out the sellers and also shows us buyers moving back in on the dips, quietly accumulating shares.
We say quietly because volume remained mostly lower as stocks traded through the week. Tuesday saw a nerve testing rally and reversal, particularly on NASDAQ, that took NASDAQ to the threshold of its own breakout only to see it snatched away. That looked bad but the selling dried up immediately and stocks moved laterally the rest of the week, punctuated by some continued breakouts and upside moves from leaders.
When you consider the start to the week, it was a very good consolidation move after the nice rally (hard to call it strong given the volume) the week before. That rally was based upon a renewed sense the Fed was in the game for just 1 or 2 more hikes. This past week the mood shifted back more to a 2 or 3 or even more rate hike mindset, and early on that threatened to completely wipe out the rally. The ability to hold the line and move in an orderly lateral test the rest of the week, however, shows there is some underlying strength holding things together, at least for now as investors gear up for the Fed winding down.
http://www.investmenthouse.com/1weekendmarketsummary.htm”>Read “The Daily” Entire Weekend Summary
Here’s a trade from “The Daily” and insights into our trading strategy:
Chart by http://www.stockcharts.com”>StockCharts.com
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http://investmenthouse.com/indexq.php?smbl=
GYMB”>
GYMB (Gymboree–$25.78; +0.20; optionable): Children’s clothing, furniture.
http://finance.yahoo.com/q/pr?s=gymb”>Company Profile
After Hours: $25.83
STATUS: Flying plateau. GYMB is working laterally the past week in a very narrow, tight range after climbing to a 7 year high two weeks back. Excellent test, refusing to give up the gains to this point. This consolidation range formed after the breakout from a nice 10 week pattern that formed using the 50 day EMA (23.88) as support. A long time coming, but GYMB finally came to life in the fall of 2005. Excellent 5 to 1 accumulation in the base shows a ton of buying. Volume is very low as it moves laterally, and now the 10 day EMA (25.37) has caught up to it. Solid fundamentals to go along with the pattern.
Volume: 373.791K Avg Volume: 667.628K
BUY POINT: $26.28 Volume=1M Target=$31.55 Stop=$24.78
POSITION: GQU HE – Aug. $25c (57 delta) &/or Stock.
http://www.investmenthouse.com/1daily1.htm”>Learn more about “The Daily” with Stock Picks! – Issued 5 Times Per Week
2) STOCK SPLITS Playing stock splits can be very profitable, but it takes know-how. Our stock split service focuses on three main types of plays: 1) pre-announcement: where we forecast an upcoming split prior to the company making the announcement;2) pre-split: these plays are made in the days leading up to the actual split day; and 3) post-split plays: plays made after the actual stock split where the stock is showing continued or renewed strength.
We play pre-split plays as short-term plays. We get in when the technical indicators show us things look right, grab as much as we can, and get out, always being conscious of resistance and support. These stocks are highly volatile at this time, and can turn on you quickly. Don’t let good profits disappear. Watch for turns, especially when a stock trades in a wide range and finishes off its high. That is a sign these stocks often give you that they are running out of steam. We usually get out and ask questions later. We can always get back in. We like to play in the money calls, preferably two strike prices in the money as this usually gives us a greater delta (the percent an option will mover versus the stock’s movement). We prefer deltas of 75 or better. This means if the stock moves 1 point, the option should move three-fourths of that point. That means up or down.
Remember, wait to see the stock start to move up. Don’t just blindly make a play and don’t try to guess tops and bottoms. We can look at indicators to give us a clue as to what will happen, but we need the stock to confirm it for us.
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Here’s a pre-split play to watch and our current analysis.
Chart by http://www.stockcharts.com”>StockCharts.com
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http://investmenthouse.com/indexq.php?smbl=
CRI”>
CRI (Carter Holdings–$67.84; -0.56; optionable): Apparel. Splits 2:1 on a date to be set.
http://finance.yahoo.com/q/pr?s=cri”>Company Profile
STATUS: Reverse head and shoulders. Still in the nice test back to the near term support, slipping to the 18 day EMA (67.59) Friday on continued below average volume. Nice action that is ready to deliver the breakout move. To recap: Interesting little 9 week base has formed, using the 50 day EMA (65.83) on the ‘head’ as support. This pattern formed right on the heels of the mid-January breakout from a 22 week ascending base. Solid leader with strong fundamentals growth rates. Nice easy pullback this week on low, below average volume is setting up the next breakout to a new all-time high.
Volume: 133.8K Avg Volume: 258.572K
BUY POINT: New: 69.32 (orig. $69.72) Volume=388K Target=$80 Stop=$67.38
POSITION: CRI IN – Sept. $70c (45 delta) &/or Stock.
Learn more about our Stock Split Report and how we have made gains of 321% with our powerful stock split plays!
http://www.investmenthouse.com/a/StockSplitReport.html”>Details Here.
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Chart by http://www.stockcharts.com”>StockCharts.com
http://www.investmenthouse.com/cc/ezpwsm.gif” width=”360″ height=”208″ border=”1″>
3) TECHNICAL PLAYhttp://investmenthouse.com/indexq.php?smbl=
EZPW”>
EZPW (EZCORP, Inc.)
http://finance.yahoo.com/q/pr?s=ezpw”>Company Profile
Sometimes profits come from areas you might not expect. Our investing is predominantly technical, i.e. we have to see a good pattern ready to move higher to pique our interest. We then look for stocks that also have solid fundamentals. In short we blend technical and fundamental analysis with an emphasis on the technical aspects.
EZPW owns and runs pawnshops and loan centers. It caught our attention in January as it moved up to form the right side of a 18 week base. Then it gapped sharply higher on volume; nice move, but hard to enter. So we bided our time and let EZPW set up again in position where we could enter just as it started its next move. It worked laterally through February, and then bolted higher to start March on strong trade.
That was our cue. We moved in with some stock positions at $23.27 and some option positions with some June $20 call options. We liked that versus the $22.50 calls because of the larger open interest and better delta, i.e. the measure of how far the option moves with each dollar of stock movement. We picked those up for $4.90. A good start and over the next four weeks EZPW rallied up the 10 day EMA on continued solid volume. A run up the 10 day EMA shows exceptional strength. In the third week EZPW consolidated laterally. We remained patient. It then shot higher on 3-20, hitting our initial target at $27.75. We debated letting it run further, but after a strong move it is always a good idea to take some gain off the table. So we took some 20% stock gain and 70% option gain, letting the rest ride. It moved laterally the rest of the week, trying to set up for another run higher. Thus far it is showing no weakness.
http://www.investmenthouse.com/1tech1.htm”>Learn more about our Technical Traders Report – Issued 5 Times Per Week Chart by http://www.stockcharts.com”>StockCharts.com
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4) COVERED CALL PLAYhttp://investmenthouse.com/indexq.php?smbl=
CRYP”>
CRYP – Cryptologic Inc. is currently trading at $25.45. The May $25 Calls (UFWEE) are trading at $2.10. That provides a return of about 7% if CRYP is above $25 on expiration Friday in May.
http://finance.yahoo.com/q/pr?s=cryp”>Company Profile
http://www.investmenthouse.com/1coveredcalls1.htm”>Learn more about our Covered Call Tables – 8 Tables Updated 5 Times Per Week
* * * SCOTTRADE * * *
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The foregoing is commentary for informational purposes only. All statements and expressions are the opinions of Online Investment Services, LP., or Split Ventures, Ltd. This information is 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 the related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolios of writers for this issue may, in some instances, include securities mentioned herein and on the related 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. No one associated herewith receives compensation in any manner from any of the companies that are discussed in this newsletter or on the related websites.
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