Commodities, Energy Lead Friday Gains
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INVESTMENT HOUSE.COMTM
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Weekend Newsletter for
April 23, 2006
Table Of Contents 1) MARKET SUMMARY 2) POST-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
Stocks close out the week in decent shape, but oil started to show its power Friday.
– Growth areas start to gag a bit Friday as oil closes over $75/bbl.
– Oil hits choke point as gasoline starts ticking $3/gallon.
– Cannibalistic action: strong world economy leads to a weaker world economy.
– Commodities, energy lead Friday gains as money pours in, chasing performance.
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Market Summary (continued)
Even with the GOOG earnings sparking early excitement the session looked to be a struggle given the prior moves that jumped the indices higher early in the week and the resistance they were working against after that move. Futures were up but fading into the open, and tech stocks, the leaders in the big move to start the rebound, were suffering from some earnings saturation and some less than stellar results reported late Thursday. The large cap NYSE stocks, however, found buyers the techs had earlier in the week, and they were up once more and moving to new post-2002 highs as the energy, commodities and industrial stocks recovered from a shaky Thursday.
The gains were not major, but they were steady once more as the NYSE indices moved to those new post 2002 highs. That came to an end in the early afternoon, however, as oil prices approached and then moved through $75/bbl. The indices dropped like stones. Energy and commodities continued higher, but the indices sold as growth stocks and consumer stocks tanked.
The $75 point is what we consider the choke point for the economy, and it was no coincidence that we started hearing reports of $3/gallon gasoline from California, New York and elsewhere. We know from last fall that $3/gallon gas starts to cave demand, and we pegged $75 per barrel as the $3 point for gasoline. The average for the week rose to $2.85/gallon, but the late week spike is going to push it quickly higher. While many still trumpet the boom, and indeed there is one, the notion that it will survive ever higher energy prices is utter folly. Hate to sound negative, but sometimes reality makes you appear negative compared to pie in the sky dreamers.
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=
BITS”>
BITS (Bitstream–$9.16; +0.41; no options): Font and font technology software.
http://finance.yahoo.com/q/pr?s=bits”>Company Profile
STATUS: Test breakout. This may not be a stock we hold forever, but it is very intriguing, showing excellent action since breaking out from a 14 month base in February. It just formed and broke out from its first base since that move, a 6 week ascending base formed using the 18 day EMA (8.27) as support. Strong volume on that breakout on Monday and then a nice, low volume test. Friday it bounced once more on rising, once again above average volume. Strong 3 to 0 accumulation in the base shows all buying as it set up for the move. Ready to move in as BITS continues higher.
Volume: 319.675K Avg Volume: 195.244K
BUY POINT: $9.35 Volume=293K Target=$11.50 Stop=$8.70
POSITION: – Stock (no option chain).
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).
For post-splits, we can play them as we would pre-splits (very short term), but we prefer to stretch our horizons, playing the trend. When playing options, we look further out, 2 or more months at least. We let the trend carry us along if there is one, but we will also take profits if the technical pattern degenerates, e.g., breaks a trendline. The main difference between post-splits and pre-splits plays is that we really have to like the pattern. Pre-splits can run right before their splits even with poor technical indicators. For post-splits, we are looking at the stocks from more of a longer term “would I buy this stock at this juncture?” position. Now there are times when a hot stock splits and investors pile in to get in while the stock is ‘cheaper.’ We play those, but with more of a short-term, pre-splits mentality in that we will be ready to get out fast if the momentum fades.
Remember, everything we do has to pass muster with the market that day … don’t fight the market on these plays.
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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 post-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=
BTU”>
BTU (Peabody Energy)
http://finance.yahoo.com/q/pr?s=btu”>Company Profile
When a market is trending, play the trend. Also, play the hottest sector and play those stocks that have something extra to give it an edge. No doubt energy is a hot sector whether oil, coal or natural gas. BTU is in the coal business but it also is just coming off a split in February that set up a very solid accumulation pattern following that split. We always watch leading stocks, particularly those that announce splits and have set up nice patterns for upside moves. We were watching BTU in its base, putting it on the report and waiting for the break higher. It showed us that move on 4-3-06, gapping higher from its ascending base. We moved in with stock positions at $51.94 and some September $50 call options at $7.20. BTU moved higher the next week, but did not give us the strong run we were looking for. It tested the gap higher, held near support. That shakeout set up a more definitive move. On 4-18 BTU shot higher on strong volume, surging over 5 points. The next session, another 5 points. The next it softened a bit. After two strong moves and the market approaching its prior highs we decided to bank some gain. We sold some stock for $60.40, a solid 16% gain. We sold some options for $12.80, a nice 77% gain. We are letting some positions run given the strength of the initial move. Indeed, BTU was up again Friday. We will let it run for us as it and its sector continue to outperform the overall market.
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=
AQNT”>
AQNT (aQuantive–$25.78; -0.73; optionable): Digital marketing.
http://finance.yahoo.com/q/pr?s=aqnt”>Company Profile
EARNINGS: 5-8-06
STATUS: Strong market leader in a 15 week base. Just coming off a low at
the 200 day SMA (22.72) in late March, rallying on solid volume Wednesday
and then testing Thursday and Friday on low volume. May come back to the
10 day EMA (25.18) before it is ready to resume the move toward a new
all-time high. Sold 4 to 2 accumulation (4 up price weeks on rising
volume to 1 down price week on rising volume) shows net buying that helps
power a stock higher out of a base. Strong money flow is jumping higher
ahead of price. After this modest test has run its course AQNT will be
ready to move higher. A market leader in earnings and sales.
Volume: 961.578K Avg Volume: 1.447M
BUY POINT: $27.15 Volume=2.2M Target=$32.95 Stop=$25.25
POSITION: QBT IE – Sept. $25c (66 delta) &/or Stock.
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=
CBI”>
CBI – Chicago Bridge & Iron Co. is currently trading at $25.15. The May $25 Calls (CBIEE) are trading at $1.35. That provides a return of about 5% if CBI is above $25 on expiration Friday in May.
http://finance.yahoo.com/q/pr?s=cbi”>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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PREMIUM SERVICES
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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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