Earnings Provide Support
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
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Weekend Newsletter for
October 23, 2005
Table Of Contents 1) MARKET SUMMARY 2) PRE-SPLIT PLAY 3) TECHNICAL PLAY 4) COVERED CALL PLAY
http://ichart.yahoo.com/v?s=^ixic”> http://ichart.yahoo.com/v?s=^dji”>
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
Strong earnings try to propel the market, but action trails off to end the week.
– NASDAQ earnings help push market higher to end week, but not much action for an expiration Friday.
– Oil struggles to hold uptrend: more thoughts on an overheated energy market versus a sign of economic trouble?
– Earnings providing some support as market continues attempt to form an October bottom for a year end run.
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Market Summary (continued)
GOOG, SNDK and others proffered strong earnings results and guidance and they were rewarded handsomely. The market started off strong along with those stocks, ready to rally once more after dipping Thursday in response to the mid-week follow through session. After the higher open, however, stocks waffled and then drifted up and down the rest of the session, holding onto some gains, but very slim gains indeed.
Semiconductors looked ready to make some headway after the Thursday close. They did, but the 0.91% gain was not the 2% or better you would expect given the strong earnings hitting the book. It was certainly not the ‘rumble’ we were looking for.
There was no real economic news, just more Fed-speak about how tough the Fed was going to be on inflation. That was old news to mix in with the new earnings results, and in the end there was little change on the day.
Indeed, the market continued its work on its attempt to form an October bottom. The move Friday was not nearly as dramatic as the previous sessions last week where the market flip-flopped more than a politician at a two party political rally. NASDAQ posted a nice gain, reversing a good chunk of the Thursday fade, but the other indices posted quite modest advances, hardly in league with the volatility seen earlier in the week.
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/quote/stkquote.php3?smbl=
ISSX”>
ISSX (Internet Security System–$23.96; +1.08; optionable): Internet security software.
http://finance.yahoo.com/q/pr?s=issx”>Company Profile
After Hours: $23.95
STATUS: Cup w/handle. ISSX looks to have started the move toward the breakout from its 11 month base. Volume jumped above average Friday as ISSX came off the 50 day EMA (23.13) and rallied well. Positive accumulation in the long base has set up the breakout. This sector is coming to life, and ISSX is a top rated stock in the market both in fundamentals and in its technical pattern. Looking for a strong volume breakout; relative strength has already broken out ahead of the stock, a very strong bullish indication.
Volume: 697.784K Avg Volume: 579.429K
BUY POINT: $25.05 Volume=869K Target=$28.95 Stop=$23.95
POSITION: ISU AE – Jan. $25c (48 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
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http://investmenthouse.com/quote/stkquote.php3?smbl=
GPN”>
GPN (Global Payments)
http://finance.yahoo.com/q/pr?s=gpn”>Company Profile
When you find a strong winner you want to stick with it. Not only do you let it run for you, you also average up into the stock as it rallies. That way you focus your money into proven winners as opposed to casting about the market. Part of that, however, also involves locking in some profits along the way, particularly with your option positions that have the time element to consider. Back in September we saw GPN break higher from a 3 month base. We like to buy into stocks as they test breakout moves, and GPN was doing that over the next week. The fact that it has a split coming is icing on the cake. We moved in with some stock at 69.72 and some November $70 strike call options at $3.50. A few sessions lateral GPN exploded higher for an $8.50 gain. After such a gain we often take some option gain and we banked half of the 114% gain on our options (sold them for $7.50).
GPN continued higher into early October and then sold for one session as the rest of the market sold off. We were waiting for another test of the 10 day EMA to enter, and it gave us that on 10-06. We saw GPN rally again on 10-7, and that was our entry point. We picked up some more stock at 79.97 and some February $80 call options for $4.60. GPN continued its steady move up the 10 day EMA all month as the market sold further. Wednesday GPN rallied again, and Thursday it was racing higher. We saw it top out and roll over. We went ahead and took the rest of our November options (expiration was Friday), selling them for $16.30, a nice 365% gain. We also sold some of our original stock positions for a 23% gain. We also sold some of our February call options for $8.60, a nice 87% gain. We are still holding the half the early stock positions, all of the more recent stock positions, and half of the February options. We will let them work for us as long as GPN continues to rally. Given that there is a split coming in December, if we get another easy test of the 10 day EMA, preferably the 18 day EMA, we will look to load up again and let it make us some more money ahead of the split
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/quote/stkquote.php3?smbl=
BCSI”>
BCSI (Blue Coat Systems–$45.43; +3.04; optionable): Internet security software.
http://finance.yahoo.com/q/pr?s=bcsi”>Company Profile
After Hours: $46.05
STATUS: Cup w/handle. Strong volume Friday as BCSI started the breakout from a big, long 20 month pattern. Excellent 17 to 6 accumulation (17 up price weeks on rising volume to 6 down price weeks on rising volume) in the base shows net buying that sets the foundation for a breakout and rally. Strong money flow compliments the accumulation. Strong break higher with plenty of room to run. A top rated stock in fundamentals and technical pattern. Ready to step in as BCSI continues this move.
Volume: 586.033K Avg Volume: 362.071K
BUY POINT: $45.75 Volume=543K Target=$54.95 Stop=$42.55
POSITION: IYU AI – Jan. $45c (54 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/quote/stkquote.php3?smbl=
XTO”>
XTO – XTO Energy Inc. is currently trading at $39.57. The November $40 Calls (XTOKH) are trading at $2.00. That provides a return of about 6% if XTO is above $40 on expiration Friday in November.
http://finance.yahoo.com/q/pr?s=xto”>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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