December 2, 2001 Weekend Newsletter
http://www.investmenthouse.com/weekend/120201.htm “> click here or on link for full report with graphs on our website
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1) MARKET SUMMARY
A subdued Friday is good news given the bad news.
– Indexes continue to hold above up trendlines in a good lateral move.
– Shake off bad news, hold steady.
– Congress ready to investigate (a.k.a., posture for votes) Enron collapse.
– Subscriber Questions.
– Team Trades.
http://www.investmenthouse.com/1weekendmarketsummary.htm “> Click here or on link for our full Weekend Market Summary
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http://www.investmenthouse.com/1daily1.htm “> Try “The Daily” with no risk for 2 weeks!
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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.
LYTS (Lsi Industries–$25.25; -0.13; no options): Splits 3:2 effective 12-7-01.
STATUS: Holding up well after an outstanding pre-split move. LYTS made it back over its 50 day MVA (23.60) and made a big move up last Friday, and continued up this week before dipping the last three sessions. This is a healthy pullback, with LYTS showing loose dojis on decreasing volume (11,500 Friday; average 25,200), Friday dipping down to 24.91 but managing to recover to close. This has been quite a move from the recent lows at 22, and the stock is now lurking just below resistance from its October high at 25.95. After this bit of rest, we will look for LYTS to make another move up and over resistance. If it can, we will carefully watch resistance from the all-time high of 27.65, which was our initial target on this move; if it can clear that, we are looking at 30, but will heed topping signs as we go. After the recent move it could still drop off, so we are protecting existing profits, but it is looking pretty strong at the moment. Excellent money flow and buying.
PLAY: From here: 26.07 on volume of 37,000. Stop: 24.50. Stock only.
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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
PHM (Pulte Homes–$39.25; +1.87; optionable): Materials & Construction.
STATUS: Breaking out of an ascending wedge that formed at the bottom of the stock’s correction from the April high (50.24). Now in a cup, this break can help PHM move into the upper reaches of the right side of that bigger pattern; it is currently at the mid-point. Volume shot up to 1 million Friday (avg. 534,000), far above the 721,000 needed for the breakout. With price inside our 5% limit for buying on breakouts (buy point was 39.28), there are still good entry points here. Money flow looks good and relative strength is breaking out. Target: 47
BUY POINT: Remains a buy up to 41.24 on continued strong volume. Stop: 38.35 (7%).
POSITION: Stock and/or January $35 calls to buy (PHM AG).
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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
TGT – Target Corp. is currently trading at $37.54. The January $37.5 Calls (TGTAU) are trading at $2.05. That provides a return of about 6% if TGT is above $37.5 on expiration Friday in January.
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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
UBS Warburg said on Friday it filed an incorrect sell order for shares of top Japanese ad agency Dentsu Inc (4324.T), which made its debut on the Tokyo Stock exchange earlier in the day.
UBS Warburg did not specify the size or the precise time of the order.
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http://www.investmenthouse.com/1ipo.htm “> This story continued in our IPO Forum
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http://www.investmenthouse.com/bookstore.htm “> FIRESALE! IN OUR BOOKSTORE!
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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.
Copyright 1997, 1998, 1999, 2000, 2001 by Online Investment Services, LP. – All Rights Reserved.
