February 24, 2002 Weekend Newsletter
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http://investmenthouse.com/weekend/022402.htm “> Read this report online in full color with graphs
1) MARKET SUMMARY
Friday action adds a bit more to Wednesday’s signs of life.
– Some positives to end the week.
– Financials not really a missing link.
– Economic indicators point to recovery, maybe a bit stronger that thought.
– Now they are ready: Big tech names look ripe for a relief move.
– 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.
WLP (Wellpoint Health Networks–$126.16; +0.10; optionable): Announced a 2:1 split, effective March 15!
STATUS: We have been looking for the elusive split, and finally got it after hours Thursday! WLP has been riding along its 18 day MVA (126.16), having recently broken out of a cup and to a new high. We were looking at a bounce play this week, and WLP has continued to hold around the 18 day with three consecutive dojis as volume dips (Friday 417,100; average 514,800). Still waiting for the move, especially now with the news of the split behind it. We are targeting our longer-term positions for 140, and on the bounce play initially targeting 134 on the quick play, but on a continued show of strength can ride up to 140.
PLAY: A move over 127.50 on above average volume, with April $120 calls to buy (WLP DD).
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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
VLY (Valley National–$33.96; +0.48; optionable): Regional Banks.
STATUS: The stock made a super uptrend from the October lows that had found support at the 200 and 50 day MVAs (the 50 day had just crossed over the 200 day MVA before the 2.5-month run started). It made two bounces from the 18 day MVA on the run, and has now tested back to the 50 day MVA simple (33.19), from where VLY bounced on Wednesday. Overall the pattern is a 14-month cup with handle, and it is now in the handle. Volume was low that day, but began rising Thursday and broke out to strong levels Friday (226,800; avg. 68,000), then stock finding support at the 18 day MVA for the gain. We are looking for a continue bounce and move over the early February (handle) high at 34.30 to kick off another good run. Target: 41
BUY POINT: Over 34.40 on continued strong volume. Stop advisory (7%): 31.99
POSITION: Stock and/or June $30 calls to buy (VLY FF; 50 open interests).
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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
KBH – Kaufman and Broad Home Corp. is currently trading at $40.05. The March $40 Calls (KBHCH) are trading at $1.70. That provides a return of about 4% if KBH is above $40 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
The pace of IPOs out of the pipeline continues in fits and starts with no more than three deals pricing in a given week. February looks set to finish with seven completed deals, the same number that priced this month a year ago. But without the billion-dollar deals that greased the wheels of the IPO market in 2001, the total proceeds this month will fall far short of the $3.7 billion raised in February last year.
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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