Jobs Lighter Than Expected
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
Read In All 50 States And Over 100 Countries
Weekend Newsletter for
July 9, 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
Investors get part of what they want, but the other part is what hurt.
– Jobs lighter than expected, but rising wages, earnings warnings jolt a market trying to consolidate for next move.
– Jobs low, wages rising, along with fears of a slower yet inflationary economy.
– ECRI: US inflation has peaked, but Fed needs help from other countries.
– Quiet earnings pre-announcement season gets a rude start, threatens to derail prior follow through rally.
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Market Summary (continued)
After fears of 368K or some other high number of non-farm jobs as indicated by the private payroll and help wanted firms, jobs were a rather anemic 121K, even less than the 160K anticipated. Taking out government jobs and you get just 90K.
That lower number initially jumped futures higher; after expecting 3 times expectations (that only makes sense with respect to the stock market) investors thought they had what they wanted, i.e. another indication of a slower economy that would get the Fed out of the game. Problem is, the Fed is just about out of the game already. The third consecutive sub-par jobs growth month along with the other economic indicators showed the economy really is slowing. Employment lags, and as we have noted, the economy has been showing those slowing signs since mid-2005. A slowing economy means slowing earnings, and that is not good for the market.
That was not the real issue on Friday, however. Wages rose faster than expected while the workweek hit a 3.5 year high. That took the bloom off the lower jobs as quickly as it came on. Then at 9:00ET, MMM lowered its guidance, citing slowing in its optic film segment, the stuff used for LCD panels and televisions. As MMM cuts across many industrial sectors, however, it was easier to read more into it. One was the high price of oil pushing component prices higher; MMM specifically noted that as well. That came on top of an AMD warning about slower sales due to a price war with INTC. The song says two out of three ain’t bad, but the two were on the bad side and not the good side.
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/abaxsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
ABAX”>
ABAX (Abaxis–$21.55; -0.10; optionable): Portable blood analysis systems for vets and humans.
http://finance.yahoo.com/q/pr?s=abax”>Company Profile
Earnings: Late July
STATUS: Cup w/handle. ABAX is working on its handle, fading back last week to test and hold the 10 day EMA (21.28) on below average volume. This action is forming the handle to a 9 week base that is setting ABAX up for a breakout to a new all-time high. A solid stock with positive accumulation to go along with its solid technical pattern. Nice test on low trade and now we look for a strong break higher on strong trade to give us the entry point as ABAX continues its move higher.
Volume: 351.492K Avg Volume: 505.864K
BUY POINT: $22.76 Volume=759K Target=$27.00 Stop=$21.17
POSITION: QOX KX – Nov. $22.50c (53 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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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-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=
RS”>
RS (Reliance Steel–$81.11; -0.56; optionable): Steel. Splits 2:1 on 7-20-06.
http://finance.yahoo.com/q/pr?s=rs”>Company Profile
Earnings: 7-20-06
STATUS: Cup w/handle. Kind of a skewed pattern, but a nice handle formed last week as RS faded back from its late June move, holding above the 50 day EMA (80.01) as it made the test. Nice test to its 8 week base that formed after RS had to correct back following the commodity spring higher in Q1. The steel is ready to pour after this test.
Volume: 727.8K Avg Volume: 672.567K
BUY POINT: $81.89 Volume=1M Target=$93.95 Stop=$79.86
POSITION: RS LQ – Dec. $85c (50 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=
RSTI”>
RSTI (Rofin-Sinar Tech–$58.00; -0.38; optionable): Laser-based products.
http://finance.yahoo.com/q/pr?s=rsti”>Company Profile
Earnings: 8-3-06
STATUS: Double bottom with handle. After a strong run in Q4 2005 and Q1 this year RSTI needed a breather. The current 9 week base that formed to consolidate the move is solid. Last week RSTI faded back on lower volume, consolidated the strong late June run higher. Strong market leader that used the market selling to set up the next break higher.
Volume: 125.355K Avg Volume: 118.321K
BUY POINT: $58.89 Volume=177K Target=$67.95 Stop=$57.33
POSITION: QRT LL – Dec. $60c (53 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=
ATI”>
ATI – Allegheny Technologies Inc. is currently trading at $66.80. The August $65 Calls (ATIHM) are trading at $6.30. That provides a return of about 7% if ATI is above $65 on expiration Friday in August.
http://finance.yahoo.com/q/pr?s=ati”>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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