Housing Contributes To Friday Rally
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
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Weekend Newsletter for
May 7, 2006
Table Of Contents 1) MARKET SUMMARY 2) PRE-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
Friday brings another day and another change in leadership as the rally picks up the pace.
– Market leadership flips again, NYSE indices surge to highs once more.
– Lower jobs report brings out talk of the ‘Goldilocks economy.’
– Housing contributes to Friday rally as TOL announces lower contract levels, but some on the Fed don’t get it.
– ECRI inflation gauge still shows inflation has peaked.
– What can you say about a market running higher on huge world liquidity? Just hope the money keeps coming.
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Market Summary (continued)
Of late each day brings a rotation of leadership as the flood of money from around the world searches for a home. Thursday techs and semiconductors stepped up, Friday the NYSE stocks were leading. Industrials, financials, energy, metals, machines, commodities, and transportation were all frisky again: anything related to the continuing industrial surge performed admirably. DJ30 had already broken out once more and of course it was up again. SP500, SP600, and SP400 all surged higher, joining the run as well, the latter two at all-time highs once more as SP500 posted a new post-2002 high. They were strong, but once more DJ30 led, even posting the strongest percentage gain.
The much weaker than expected jobs report (138K) fostered the surge. The indices were already on the move after oil prices reversed Wednesday and dropped hard Thursday on the heels of a surprise build in gasoline inventories after demand flattened to end April when prices hit the $3+/gallon level. Falling energy prices takes the heat off of the consumer and helps keep the economy moving. The significantly lower jobs report takes some heat off the Fed re raising rates, also helping keep the economy moving. The market liked it. After a choppy slog higher, the market finally looks to be putting together a run of more than a couple of sessions.
It was interesting, however, that technology and semiconductors, the leaders Thursday, were up but not leading Friday what with the lower energy costs and the lower jobs that might get the Fed off the economy’s back a bit sooner. Those are growth sectors and they were not partying as hard as the industrials. The market is not showing any economic weakness overall, but NASDAQ is still lagging, and economic growth typically fosters stronger technology growth. NASDAQ held its breakout despite the selling early last week and it rallied to end the week, but it has a lot of work still ahead of it before it can again boast a new post-2002 high. The good thing about the Friday tech action? SOX is still in solid shape to move higher, and a day or two of rest only sets it up to move higher once more when the money rotates yet again.
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
http://www.investmenthouse.com/cc/helxsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
HELX”>
HELX (Helix Technology–$42.91; +1.52; optionable): Oil & gas service company.
http://finance.yahoo.com/q/pr?s=helx”>Company Profile
After Hours: $42.86
STATUS: Cup w/handle. Strong volume to end the week as HELX starts the breakout move from its 15 week base formed using the 50 day EMA (38.54) as support. This is setting HELX up for a new high. Solid 4 to 2 accumulation shows plenty of buying, setting up the breakout move to come. Like that volume as it tested down to the 18 day EMA (39.93) and then rebounded. Solid fundamentals to go along with the pattern.
Volume: 2.288M Avg Volume: 1.212M
BUY POINT: $43.89 Volume=1.6M Target=$52.50 Stop=$41.75
POSITION: KPQ IH – Sept. $40c (69 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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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/indexq.php?smbl=
FTO”>
FTO (Frontier Oil–$63.37; +2.38; optionable): Oil refining. Splits 2:1 on 6-27-06.
http://finance.yahoo.com/q/pr?s=fto”>Company Profile
After Hours: $63.35
STATUS: Ascending base. FTO is making a series of higher lows over the 18 day EMA (60.45) below a constant top at 63.90. After 5 weeks of this it looks to have built up enough pressure from below to send it higher and continue the breakout move from late February. Strong shot of volume Friday as FTO jumped off the 18 day EMA and toward the breakout point. Ready to move in as FTO continues higher. Like these patterns as the move higher can be explosive.
Volume: 1.751M Avg Volume: 1.457M
BUY POINT: $63.95 Volume=2.2M Target=$75.95 Stop=$60.38
POSITION: FTO JM – Oct. $65c (55 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/indexq.php?smbl=
AGU”>
AGU (Agrium–$27.14; +1.56; optionable): Agricultural chemicals.
http://finance.yahoo.com/q/pr?s=agu”>Company Profile
EARNINGS: 5-5-06
STATUS: Ascending base breakout. Strong move higher on huge volume Friday as AGU broke out from its 12 week ascending base that formed using the 50 day EMA (25.18) as support. This is a nice base on base pattern, the second base after a nice 6 month cup with handle. The two bases tend to really shake out the sellers. Positive accumulation and surging money flow go hand in hand. Relative strength broke out on Friday as well, a good corroboration of the price move. Looking to start the position as AGU continues higher and then add to positions as it makes its first test and holds. Solid stock.
Volume: 3.241M Avg Volume: 666.611K
BUY POINT: $27.25 Volume=750K Target=$32.50 Stop=$25.38
POSITION: AGU JE – Oct. $25c (63 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/indexq.php?smbl=
TS”>
TS – Tenaris SA is currently trading at $44.44. The June $44 Calls (TSWFU) are trading at $3.10. That provides a return of about 6% if TS is above $44 on expiration Friday in June.
http://finance.yahoo.com/q/pr?s=ts”>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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