April 21, 2002 Weekend Newsletter
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http://investmenthouse.com/weekend/042102.htm “> Read this report online in full color with graphs
1) MARKET SUMMARY
Market hangs on to support despite tribulations late in the week.
– Nasdaq finishes week positive, but it was no breakthrough.
– Interesting crosscurrents in the market and economy.
– Market.
– Subscriber Questions.
http://www.investmenthouse.com/1weekendmarketsummary.htm “> Click here or on link for our full Weekend Market Summary
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2) Stock Splits
Be sure to read our Stock Splits Manual. 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. Here’s a pre-split play to watch and our current analysis.
WTSLA (Wet Seal–$37.30; +0.40; optionable): Retail. Splits 3:2 effective 5-10-02.
STATUS: Wet Seal has been trending up steadily along its short-term MVA’s (18 day at 36.17), and after a nice early April bounce, it has pulled into a tightening pennant. Volume has tapered off in the pattern, and Friday WTSLA showed a doji with very low volume of 69,100 (average 306,000). Looking for a one or two more bounces before we look at another test of the 50 day (33.33), looking for quick plays with options. Target on the bounce: 42.
PLAY: Aggressive: Over 38, with June $35 calls to buy (WTG FG). Stop: 35.75.
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http://www.investmenthouse.com/1stocksplits1.htm “> Click here to learn more about our Stock Split Report – Forbes.com Best of the Web Online Edition says: “. . . seek out the Stock Split Report . . .”
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3) Technical Play
ESI (ITT Educational–$49.40; +0.85; optionable): Education and Training
STATUS: Successful test of breakout. Broke out of a 9-month cup with handle 4 sessions back on a strong surge in volume for the entire week. Thursday it showed a doji and Friday it started back up. Volume was strong once again (284,600; avg. is 134K) as the stock started back up. Buying after a successful test of a breakout is one of our favorite points because the breakout has shown some staying power. Money flow is strong, relative strength has broken out, and the price/volume action in the pattern was solid.
BUY POINT: 49.60 on volume of 250K or better. Target=56.75 (initial). Stop=46.20.
POSITION: Stock and/or October 45c to buy (ESI JI; low OI currently).
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http://www.investmenthouse.com/1tech1.htm “> Click here to learn more about our Technical Trader Report
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4) Covered Call Play
GSF – GlobalSantaFe Corp. is currently trading at $32.55. The May $32.5 Calls (GSFEZ) are trading at $1.75. That provides a return of about 6% if GSF is above $32.5 on expiration Friday in May.
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http://www.investmenthouse.com/1coveredcalls1.htm “> Click here to learn more about our Covered Calls Service
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5) IPOs
Investors spent $628 million this week on two IPOs. 76% of that went to help Continental Airlines get off the ground again. The parent of the newly public ExpressJet (ticker: XJT) received all of the proceeds from the regional carrier’s IPO. Despite pricing at the top of its range, the new stock was hit by a sell-off in airline stocks following a plane crash in Milan Thursday. Investors showed interest in the offering and demand pushed the stock as high as $17.40, or 9% over the IPO price, in its first day of trading. Even though ExpressJet emerged from the challenging 2001 with a noteworthy $48 million profit, the deal never sparked the buzz that piloted discount airline JetBlue (ticker: JBLU) to the best first day performance of the year, a 66% gain.
http://www.investmenthouse.com/1ipo.htm “> . . . continued . . .
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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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