Factory Orders Post Solid Rise
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
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Weekend Newsletter for
February 5, 2006
Table Of Contents 1) MARKET SUMMARY 2) PRE-ANNOUNCEMENT 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 sold again on more Fed fears with large caps leading lower even as many stocks set up to try another move.
– Stocks under pressure again as jobs report rekindles notion Fed is not almost done.
– Non-farm jobs miss expectations, but revisions and a 5 year low in unemployment show underlying strength.
– Shades of 2000: Recent economic indications all showing some weariness even as Fed purportedly prepares to extend rate hike campaign.
– Factory orders post solid rise, particularly business spending.
– Market will have to show some unexpected strength once again as rally nears the end of the rope.
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Market Summary (continued)
Futures were down but got really ugly after the jobs report showed 4.7% unemployment and wage gains for those with jobs. Techs were the focus and NASDAQ gapped lower, continuing the Thursday selling. NASDAQ and SP500 fell to the 50 day EMA early on. There they held and bounced, with SP500 even cracking positive in the early afternoon (NASDAQ was within 6 points) with a very nice response to the selling. It almost had the look of a shakeout. Problem is, the large caps were under pressure all session, and after this bounce they spearheaded the move back down into the close.
NASDAQ and SP500 found the 50 day EMA once more as the large caps, particularly mega cap techs, were the focus of the selling once more, similar to mid-January when they started reporting earnings. SOX held its 18 day EMA and SP600 the 10 day EMA as non-large caps went about their own business. Recall that SP600 was ready for its own pullback after leading the pack higher. It is doing just that. Unfortunately, we were looking for the large caps to step in and rotate to the lead position for a bit while the small caps rested. Instead the large caps are belly flopping lower with the top 100 market cap techs leading the way.
The catalyst was not the rumors swirling Thursday (change in terror alert status, blowout jobs number), but a rekindled belief the Fed is not really that close to completing its rate hikes. Now the story you heard on the financial stations hung the collar on the jobs report with its low unemployment rate and growing wage measure. Funny thing that argument. When we were convinced jobs were growing outside the non-farm payroll number back in 2004 based on the unemployment rate decline, the Fed was arguing that data point was grossly inaccurate in assessing jobs growth. Now two years later that data is somehow imbued with that power. More than that, the figure is being used to suggest that the economy is very strong and thus the Fed is going to have to continue raising rates to corral inflation.
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=
MCHP”>
MCHP (Microchip–$36.62; -0.38; optionable): Semiconductors.
http://finance.yahoo.com/q/pr?s=mchp”>Company Profile
After Hours: $36.63
STATUS: Breakout test. Back to the 10 day EMA (36.64) to end last week as MCHP made a low volume test last week in the market selling, testing the nice January breakout from its short double bottom base. That short base formed after a 4.5 month pattern set the stage. Now it is running. After this test it will be ready to continue the breakout run. Strong money flow is still leading higher; relative strength is still hold the breakout as well. Solid chip leader and looking for the next entry point.
Volume: 1.576M Avg Volume: 1.735M
BUY POINT: $37.55 Volume=2.3M Target=$43 Stop=$36
POSITION: QMT GG – July $35c (56 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.
Pre-announcements are where we put in the long hours of research, chase down leads and rumors, and pump our contacts for information in order to determine if a split is in the works and to pinpoint an announcement date. Pinpointing the date is our primary goal as this allows us many more options in how we play a split. As we primarily focus on leadership stocks in good technical patterns, if we see the stock make the breakout we will get in earlier and ride the wave of speculation up to or through the announcement. Pinpointing a date and time also allows us to open positions immediately prior to an announcement, minimizing our exposure time to the market whims. We employ this strategy regularly in a number of situations. When we have ridden a stock for a few days, a week, a few weeks, up to the forecast announcement, we often have a lot of profit built in. After all, these are leaders and they attract attention moving into earnings, shareholder meetings, etc. We often sell some positions (all or a partial), lock in the profit, and take positions with higher strike call options near the current stock price at a cheaper cost if the stock is not overextended, i.e., has done all of its running before the forecast announcement. This way we bank some profit from the early run, and take some of that profit to play the actual split. Even if the board pulls a fast one on us and does not announce, we still have profit in the bank. This method also works well when the market is choppy, and we do not want to hold positions long. We can often buy right before the announcement and then sell when we feel the split announcement has run its course and the stock starts to pull back. Narrowing the predicted date and time of the split gives us these options.
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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-announcement 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=
SLB”>
SLB (Schlumberger Ltd.)
http://finance.yahoo.com/q/pr?s=slb”>Company Profile
It is no secret energy stocks and oil and gas service stocks in particular, are doing well. The trick is knowing when to move in as opposed to just following the herd and buying in just to see the sector top out. SLB had the added benefit of being a stock split play for us as we anticipated a split announcement in January. SLB had jumped off the 50 day EMA to start the month and then moved into a weeklong lateral consolidation, but refused to give any of the move back. With our anticipated split announcement ahead we were ready for a break higher to give us the entry point. On 1-17 it gapped higher from that consolidation and we moved in with some stock positions at 109.45 and some May $110 strike call options at $7.50. SLB moved laterally the next day but then made the split announcement and shot higher. The first day it moved $6.55, then $7.38 the next. Add to that another $3.75 the next session. We took some strong stock gain and some 125% option gain on the move. SLB is making a test of that run now, coming back to the 18 day EMA on lower volume. We anticipate SLB will continue higher from here and give us yet another strong move ahead of the split. Love playing splits because we play the market leaders when we do.
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=
ORCC”>
ORCC (Online Resources–$13.26; +0.14; no options): Outsourced internet financial services for financial service providers.
http://finance.yahoo.com/q/pr?s=orcc”>Company Profile
After Hours: $13.27
Earnings: 2-14-06
STATUS: Breakout test. ORCC is making the second test of the early January breakout from its 9 week double bottom base that acted as the handle to a larger 7 month cup with handle. Solid stock with great fundamentals to go along with its solid technical pattern. Tapped at the 18 day EMA (12.85) on the Thursday and Friday lows, rebounding both sessions to hold the 10 day EMA. Strong money flow and a relative strength breakout when ORCC gapped higher in late January. This test is filling some of that gap. Looking for volume to jump back above volume as ORCC resumes its breakout run.
Volume: 66.252K Avg Volume: 124.206K
BUY POINT: $13.57 Volume=186K Target=$16.29 Stop=$12.78
POSITION: – Stock (no option chain).
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=
RGLD”>
RGLD – Royal Gold Inc. is currently trading at $36.30. The March $35 Calls (MJQCG) are trading at $3.30. That provides a return of about 6% if RGLD is above $35 on expiration Friday in March.
http://finance.yahoo.com/q/pr?s=rgld”>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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