Earnings Running Ahead of Expectations
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INVESTMENT HOUSE.COMTM
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Weekend Newsletter for
July 24, 2005
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 overcome Thursday issues, recoup some losses.
– Stocks overcome obstacles and melt higher into weekend.
– So China has agreed to float the yuan. So what? We should focus on the real issues.
– Market gets dose of reality to temper the good news saturation.
– Earnings running ahead of expectations for third consecutive quarter, helping spur and hold gains thus far.
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Market Summary (continued)
Thursday’s uncertainty was not necessarily cleared up Friday what with some earnings disappointments from MSFT and key biotechs as well as continued terror problems in London. Stocks were set to basically open flat, but found an early bid and jumped higher out of the gates. SP500 stalled near the 1229 level in that opening salvo, however, and that sent the market into negative territory as it appeared the morning events, particularly the continuation of the London terror issues, were spooking investors heading into the weekend.
Stocks were iffy to begin with given the MSFT earnings and Google’s lukewarm guidance. It did not help that the recent leading biotech sector was racked by a big earnings miss from AFFX. Those heavyweights worked to offset some excellent results from BRCM, GNSS and others, at least early on.
Europe was one of the keys to the ultimate success Friday. When its markets turned positive to close, that helped the US markets shake off the worries and rally positive mid-afternoon and into the close. If the markets where the trouble is can close positive, the least we can do is close positive.
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=
CLMS”>
CLMS (Calamos Asset Management–$29.18; +0.07; no options): Financial services (investment brokerage).
http://finance.yahoo.com/q/pr?s=clms”>Company Profile
After Hours: $29.18
STATUS: Cup w/handle. A new issue in October 2004, the current 18 week base is CLMS’ first real base and we love to move into new issues after the first base flushes out all of the IPO sellers. It has spent the past two weeks moving laterally over the 10 day EMA (28.78), forming the handle that shakes out the last sellers before it launches higher. Outstanding 7 to 1 accumulation (7 up price weeks on rising volume to 1 down price week on rising volume) shows a lot of buying during the base. Money flow is surging higher as well, indicating the buying continues even as CLMS forms the handle. Excellent pattern and we have seen several of the less well known investment stocks breaking higher. Looks ready for a breakout that will take it to a new all-time high.
Volume: 116.107K Avg Volume: 210.812K
BUY POINT: $29.75 Volume=316K Target=$33.95 Stop=$28.55
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.http://www.investmenthouse.com/1stocksplits1.htm” target=”_top”>http://www.investmenthouse.com/images2/cnbc.gif” width=”39″ height=”31″ border=”0″ alt=”CNBC Interview”>
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/quote/stkquote.php3?smbl=
JAH”>
JAH (Jarden–$38.40; +0.55; optionable): Branded consumer products of all kinds.
http://finance.yahoo.com/q/pr?s=jah”>Company Profile
STATUS: Breakout test. Volume moved back above average Friday as JAH started a solid move off of the 18 day EMA (37.19) in a test of the late June breakout and run higher. Nice action and still a buy on this move. To recap: Nice action last week as JAH tapped the 18 day EMA on the low and rebounded. This test of the 18 day EMA it looks to have set the rebound following the breakout test. JAH gapped higher in late June out of a 19 week ascending base that formed at the 50 day EMA. It rallied to 40 on solid trade, and has spent the past two weeks coming back on lower, below average volume to test the move. It has held above the 18 day EMA on this test, and is resuming the move on solid volume, following the strong money flow higher. Still a buy.
Volume: 568.4K Avg Volume: 722.267K
BUY POINT: New: $38.55 (orig. $38.22) Volume=1.1M Target=$43.95 Stop=$36.69
POSITION: JEP JX – Oct. $36.625c (62 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/quote/stkquote.php3?smbl=
GNSS”>
GNSS (Genesis Microchip, Inc.)
http://finance.yahoo.com/q/pr?s=gnss”>Company Profile
GNSS is a semiconductor integrated circuit company whose stock is in recovery mode as has been the rest of the semiconductor sector. It broke out from a cup with handle base in early June, rallied, formed a lateral consolidation, and then started to break higher in July, continuing the breakout as it moved toward earnings. We like to move in after the first breakout move when the stock makes its test because when a stock rebounds from the test that shows that buyers still want the stock even at the higher levels. When we saw GNSS start to head back up on strong volume 7-11 we were interested in taking some positions as we liked the breakout and successful test, and also believed it would post some strong earnings results. We issued an alert and then moved in with some stock at $20.81 and some December $20 call options at $2.80; the 54 delta would give us some good movement in the option. As the stock rallied, GNSS continued to move higher ahead of earnings, but no big move. That is until the day before when it got some cold feet and sold back to the 18 day EMA. We hung with it and sure enough the earnings were as expected. GNSS gapped higher on the strong volume running to 25.95 on the high early in the session. We let it run but when we saw it peaking on the early run & the market showing signs of doing the same we decided to take some gain with the stock at 25.40 and the options at 6.20. Nice 22% stock gain and a nice 121% option gain in just over a week.
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=
THO”>
THO – Thor Industries, Inc. is currently trading at $35.50. The September $35 Calls (THOIG) are trading at $1.95. That provides a return of about 4% if THO is above $35 on expiration Friday in September.
http://finance.yahoo.com/q/pr?s=tho”>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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