February 10, 2002 Weekend Newsletter
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http://investmenthouse.com/weekend/021002.htm “> Read this report online in full color with graphs
1) MARKET SUMMARY
More selling turns into the relief bounce we were anticipating.
– Reflex bounce on lighter volume as expected.
– Big name stocks rally while recent leaders take a low volume rest.
– Getting to the real problem with Enron, Global Crossing, and other accounting issues.
– 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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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.
BSYS (Bisys Group–$61.56; +1.60; optionable): Business software. Splits 2:1 effective 2-25-02.
STATUS: Broke out of a reverse head and shoulders in November, but the moved maxed out at 66.13, turning over and gradually dropping in January. It gave up its 50 day MVA (60.61) late last month, recovering but unable to clear its 18 day MVA. After again dropping through the 50 day and making a higher low, BSYS has started a move back up, and Friday took out its 50 day and 18 day MVA’s (18 day at 61.26). Not much volume behind the move (down to 461,300 Friday; average 573,000), but with pre-splits we see volatility that makes volume a factor that is not as crucial. We will see if BSYS can continue the move, targeting the recent high (66).
PLAY: Aggressive: A move over 62, with stock and/or March $60 calls to buy (BQY CL).
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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
COTT (Cott Corp–$17.12; -0.05; no options): Soft Drinks.
STATUS: Pulling back from the top of a year-long uptrend, more specifically from a strong move up from the 50 day MVA that gathered steam at the top, on a breakout from an 8-week cup that did not form a handle. Volume has fallen off gradually along with price from the top at 18.07, down by Friday to 100,700 (avg. 313,000). With the shooting star doji at the bottom of the breakout test, holding above support at 17/10 day MVA at 16.93, looking for another strong move up. Money flow strong and ahead of price, and buying is solid. Target: 22
BUY POINT: 17.55 (hit 17.50 three times in the pullback) on 315,000 or higher volume.
Stop: 16.32 (7%).
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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
INTC – Intel Corp. is currently trading at $32.54. The March $32.5 Calls (INQCZ) are trading at $1.90. That provides a return of about 6% if INTC is above $32.5 on expiration Friday in March.
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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
Investors began this week with high hopes for the four companies expected to go public, but after a lawsuit disrupted the first Internet related IPO since March 2001 and the first drug discovery withdrew its IPO blaming the classic reason “market conditions” just two priced. Only an IT solutions firm for government defense programs and a Russian juice maker were able to complete IPOs.
http://www.investmenthouse.com/1ipo.htm “> . . . continued . . .
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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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