Jobs Report Doesn’t Phase Stocks
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
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Weekend Newsletter for
April 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
Stocks shake off jobs report but bond market sell-off bleeds over into equities.
– Jobs report doesn’t phase stocks, but rising rates gut a Friday rally attempt.
– Fear of flying: why we are conditioned to fear prosperity.
– A little bit of history repeating, but maybe not.
– Money supply and interest rate advance remain positives.
– Friday price fade was strong but leadership still positioned to move after this pullback.
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Market Summary (continued)
As expected, the jobs report was stronger than expected, but futures rallied after wages showed little headway, coming in lower than forecast. Stocks opened higher out of the gate with NASDAQ, SP500 and SP600 pushing to new post-2002 highs. We were concerned an early jump might flare out, but also felt that the recent NASDAQ break higher and SOX’ rebound would help support an early move. That did not happen.
Stocks were up early, but bonds started to fade quickly. Yields pushed higher and higher with the 10 year closing at 4.98% and the 2 year at 4.90%. The 30 year has already crossed the 5% threshold, closing at Friday at 5.05%. As the 10 year definitively broke through 4.80%, stocks again started to suffer.
After that quick start the slide began. Within the first hour SP500 had slipped back below 1310, its March resistance point, as it and the other indices were on route to a steeper decline. Two and one-half hours into the session and stocks basically hit their bottom for the session, SP500 struggling to hold its 18 day EMA for the next 4 hours. After that long consolidation attempt by all of the indices, however, stocks found no traction and a modest bounce attempt faded into the close. That left the indices basically closing on their session lows, never a good indication as it shows there were simply no buyers willing to risk an over the weekend commitment with new positions.
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=
RMBS”>
RMBS (Rambus Inc.)
http://finance.yahoo.com/q/pr?s=rmbs”>Company Profile
While semiconductors have lagged the last move in the market, there chip leaders that remain strong, setting up bases and breaking out to give us good buy points as they surge higher. RMBS is one of those chips that has weathered the selling and used it to set up its moves higher. We played it on its January breakout and surge higher. After that run it faded and we waited for the next play to set up. It did in March as RMBS formed a short cup with handle. We always like to see this pattern as it typically sets up good breakouts and strong runs higher. We watched it form the handle in early march, moving lower on low volume. It found support and then broke higher on 3-17 with a gap out of the pattern. We picked up some stock positions at 33.79 during an intraday test of the gap higher and some August $35 call options at $7.30; they always seem pricier on RMBS given its volatility.
The timing on the breakout was good because RMBS rallied higher up the 10 day EMA for the next two weeks. It peaked at 40 and slid toward the 10 day EMA on low volume; that is a typical test of a breakout move. We were patient and let it make the test. Then it blasted higher Thursday on strong trade, hitting our initial target. We decided to go ahead and take some of the gain, selling some stock for 42.10 and a 24.5% gain and some options at $11.80 for a 61% gain. Not bad for slightly more than two weeks in the play, and with our remaining positions this leader will likely give us even more gain to come.
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
http://www.investmenthouse.com/cc/tlmsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
TLM”>
TLM (Talisman Energy–$56.19; -0.66; optionable): Independent oil and gas. Splits 3:1 on 5-31-06.
http://finance.yahoo.com/q/pr?s=tlm”>Company Profile
STATUS: Cup w/handle. Forming a handle rather far down in its 11 week base, but after the nice volume on the Thursday gap higher we are looking to start the play on the next move higher that shows some good trade. Friday TLM faded back some but on much lower, below average volume. Nice test of the good Monday through Thursday move; may take another session or two to get it fully set up for the rebound but that high volume shows us the buying interest is there.
Volume: 814.8K Avg Volume: 1.25M
BUY POINT: $57.48 Volume=1.5M Target=$67.95 Stop=$55.65
POSITION: TLM GK – July $55c (62 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
http://www.investmenthouse.com/cc/chrtsm.gif” width=”360″ height=”208″ border=”1″>
3) TECHNICAL PLAYhttp://investmenthouse.com/indexq.php?smbl=
CHRT”>
CHRT (Chartered Semiconductor–$9.93; -0.23; optionable): Semiconductors.
http://finance.yahoo.com/q/pr?s=chrt”>Company Profile
STATUS: Breakout test. CHRT surged out from its 8 month cup with handle to end March, surging on very strong volume. The past week it tested that move, coming back to the 10 day EMA (9.78) on lower and lower trade, ending the week Thursday and Friday with below average volume. Nice first test of the breakout, a great entry point when the stock starts back up on rising trade. Strong 9 to 4 accumulation in the base shows lots of buying that set up the breakout and now the run. Strong money flow as well. Fundamentals are strong to match the pattern.
Volume: 161.294K Avg Volume: 179.287K
BUY POINT: $10.05 Volume=225K Target=$12.25 Stop=$9.65
POSITION: UCT IB – Sept. $10c (55 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 $197.60. The May $195 Calls (TSWES) are trading at $12.80. That provides a return of about 6% if TS is above $195 on expiration Friday in May.
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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