Chips Ready To Lead
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
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Weekend Newsletter for
December 11, 2005
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
Oil and stocks pass each other on the way to a modest market rebound.
– Modest low volume gain Friday, but chips shake off INTC update and look ready to lead.
– Early Michigan sentiment read continues to improve.
– Fed ahead and a language change is expected.
– Investors hopeful as oil tries to set up right shoulder to bearish base.
– First loss in 8 weeks setting NASDAQ up for a bounce heading into FOMC meeting.
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Market Summary (continued)
Once more stocks had a difficult time figuring out what they wanted to do. The entire week stocks were all over the map intraday though the direction for the week was slightly lower. Each session stocks tried an early rally only to give it away by the close. Friday stocks were showing more upside stamina, but by midmorning they were again in negative territory, turning an early bounce into losses. It was more of the same story.
More of the same but with an ongoing change. Thursday stocks gave up early gains yet again, but in the last hour NASDAQ bounced off of its 18 day EMA near support and took back a sizable chunk of its loss, and it did so with a solid volume jump. It did not close positive, but it also did not just thud to the bottom of the range and close. Despite the negative close breadth was positive. Signs of life. Friday NASDAQ and SP500 again tested toward their 18 day EMA, and again they rebounded. This time they found their way back to positive and they managed to hang onto the gains to the close.
Volume was lower so it wasn’t any renewed buying surge, but it was a further progression in the change back to more bullish action after the market went flat following the strong bounce higher two Thursdays back that showed a lot of promise but lacked stamina. Significantly, the semiconductors, plagued by Intel’s weak-kneed mid-quarter update early on, staged a reversal as well that even saw INTC turn back to positive. SOX tested the 18 day EMA as well Thursday and early Friday, but it posted an impressive recovery Friday, leading the market once again. It was a key leader on the recent move, breaking out to start the month. Friday’s action looks as if SOX is ready to lead higher again. Very bullish to overcome disappointing news from a much followed big name. It did not hurt that analysts concluded that much of INTC’s trouble resulted from low chip inventories everywhere, something bullish for the sector overall.
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
http://www.investmenthouse.com/cc/cerssm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
CERS”>
CERS (Cerus Corp.–$10.06; +0.43; optionable): Biotechnology.
http://finance.yahoo.com/q/pr?s=cers”>Company Profile
STATUS: Cup w/handle breakout. Breaking higher on strong trade Tuesday, taking a pause Wednesday and Thursday, and then back at it Friday on solid trade. The move took it out of a nicely formed 11 week base sporting strong 4 to 2 accumulation (4 up price weeks on rising volume to 2 down price weeks on rising volume). Strong money flow as well, leading higher ahead of price. Relative strength broke out, an indication the move has some legs to it. Moving well and ready to step in as it continues higher this week.
Volume: 248.482K Avg Volume: 139.325K
BUY POINT: $10.38 Volume=209K Target=$12.48 Stop=$9.65
POSITION: QIJ EB – May $10c (55 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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Listen to Stock Split Report Editor Jon Johnson’sstock split interview on CNBC-TV [ http://www.investmenthouse2.com/cntdir.asp?name=JonJohnson-B” target=”_new”>Broadband | http://www.investmenthouse2.com/cntdir.asp?name=JonJohnson-D” target=”_new”>Dial-up ]
Here’s a pre-split play to watch and our current analysis.
Chart by http://www.stockcharts.com”>StockCharts.com
http://www.investmenthouse.com/cc/talxsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
TALX”>
TALX (Talx Corp.–$42.58; +0.63; optionable): Automated employment/income verification, tax management services, etc. Splits 3:2 on 1-18-06.
http://finance.yahoo.com/q/pr?s=talx”>Company Profile
STATUS: Test 50 day EMA. TALX is coming off a 50 day EMA test (39.69), waiting to get some volume this week as the market rebounds. TALX did a fair job of bouncing last week when the market struggles, and that indicates TALX will be ready to really move when it gets some real buying. A strong market leader in fundamentals and technical position, bouncing off the 50 day and the August high that marked the top of its base. Ready to move in this week.
Volume: 154.373K Avg Volume: 247.177K
BUY POINT: $42.72 Volume=285K Target=$50.95 Stop=$41.65
POSITION: TUB CH – Mar. $40c (60 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
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3) TECHNICAL PLAYhttp://investmenthouse.com/indexq.php?smbl=
BBBB”>
BBBB (Blackboard Inc.)
http://finance.yahoo.com/q/pr?s=bbbb”>Company Profile
BBBB is making a classic run higher after a strong breakout, and that gives us many chances to profit. The first is on the breakout, and then we can move in as the stock makes its periodic tests of the breakout as it comes back to the 10 or 18 day EMA. Indeed, one of our favorite entry points is after the initial breakout for a base, when a stock comes back and tests the breakout and resumes the move higher on strong volume. That shows us the big buyers are back in and still want the stock following the breakout.
That was the case with BBBB on 10-31. It broke out in mid-October, then made a test of the 18 day EMA. It rebounded on stronger volume on Halloween, and that is when we moved into the position. We bought some stock at $27.55 and some January $25 call options at $3.70. We typically like to play some options on a strong stock as that gives us some excellent leverage for very strong gains in addition to a nice stock investment that is not limited by an expiration date. BBBB continued higher over the next couple of sessions, adding another $2.50 from our entry point. It then faded some, holding most of its gains. It could not continue, however, and slipped into a two week tight lateral move along the 18 day EMA. Then it came back to life to end November, surging off the 18 day once more. After that move it faded again to the rising 18 day EMA, and that test sent it surging higher again. Friday it made yet another break off the near term support, and that took it to our initial target. The stock was at $32.20, and we took some solid 16.8% stock gain and sold some of our options for $7.20, a nice 94% gain (that is the leverage we talked about). We are letting the rest of the positions run; we take some gain, particularly with options, when we get strong moves, but with a stock that is performing well we like to let at least part of the position run and work for us longer term.
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=
RI”>
RI – Ruby Tuesday is currently trading at $25.51. The January $25 Calls (RIAE) are trading at $1.50. That provides a return of about 4% if RI is above $25 on expiration Friday in January.
http://finance.yahoo.com/q/pr?s=ri”>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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