Jobs Report Gives Market a Reason to Take a Breather (Weekend Issue)
INVESTMENT HOUSE.COMTM
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Weekend Newsletter for
June 5, 2005
Table Of Contents 1) MARKET SUMMARY 2) PRE-SPLIT PLAY 3) TECHNICAL PLAY 4) COVERED CALL PLAY
http://ichart.yahoo.com/v?s=^ixic”> http://ichart.yahoo.com/v?s=^dji”>
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
Huge week of data helps stocks rally but then starts a pullback on Friday.
– Jobs report gives market a reason to take a breather.
– Jobs weak as expected but unemployment falls to pre-9/11 levels
– Don’t forget US entrepreneurship.
– ISM Services falls below expectations as well.
– Techs lead up, techs lead down. At least volume was lighter.
– Reality check coming as oil keeps rising and Greenspan speaks twice, ready to rebut idea Fed is nearly done.
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Market Summary (continued)
What a week of data, and it was not limited to just the government reports. There was plenty from the Feds with the ISM, factory orders, consumer confidence, and the jobs report. That, however, was just part of the news. Oil climbed back into the mid-fifties. France and the Netherlands voted down the EU constitution. That spurred the dollar and continued the bond rally, further flattening the yield curve. Then the Dallas Fed president candidly spoke about where the Fed was in its rate hiking that further sparked the rally in stocks and bonds, and it steepened the yield curve as the 2 year rallied faster than the 10 year.
The flood of data, the possibilities it generated, and the rally it helped further left stocks spent by Friday. The prospect of the Fed being closer to done than somewhere in the middle of a prolonged rate hike spree gave stocks another good push higher mid-week. SP500 pushed above 1200 and NASDAQ rallied within 2 points of 2100. Those are key resistance points, and after a steady and sustained rally they were likely to cause some sort of pause. Friday stocks did just that.
You could blame the weaker than expected non-farm payroll data for the selling, but let’s face it, stocks had run a long way, they got an almost euphoric-like boost midweek (we heard the Fisher rally session referred to as nirvana), and were at resistance. The jobs data was used as an excuse to sell and lock in some gains. Long run, low overall volume, oil back up to $55/bbl, questions about just what the Fed is going to do (Friday Fed governor Gramlich said he had no idea what inning the Fed was in), NASDAQ at resistance, and a weekend ahead. Time to sell and lock in some gain, and that is what investors did.
It was not a rout. The leaders on the way up were the downside leaders Friday. In other words NASDAQ and SOX led the move lower. That is typical. They held near support and volume was lower. That is good. After NASDAQ showed some better volume the past few sessions the lower volume selling was good to see. It shows that there was more buy side volume coming into technology on the upside and when the buyers paused the sellers did not rush in to fill the void. Leaders fell back to near support on lighter trade as they continue to trend higher. The point loss was more than you want to see on the indices, but the action remains positive for now as NASDAQ, SP500, SP600 and SOX continue their move up the 10 day EMA. Now they need to turn stingy with the gains once more, consolidate below this resistance, and prepare for the next attempt to break through.
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/quote/stkquote.php3?smbl=
FLR”>
FLR (Fluor Corp.–$60.82; +1.79; optionable): Engineering, construction services.
http://finance.yahoo.com/q/pr?s=flor”>Company Profile
STATUS: Reverse head and shoulders. FLR announced some major contracts last week, and that pushed it to start the breakout move. Volume was up, and it was surging Friday as FLR pushed the breakout move from its 14 week base. Solid pattern that used the 50 day EMA (56.56) as support for the two shoulders. Excellent 5 to 2 accumulation (5 up price weeks on rising volume to 2 down price weeks on rising volume) shows plenty of buying, and it is continuing as money flow is racing higher ahead of price. Looking to initiate positions on a further move and then again on a successful test of the breakout move.
Volume: 1.508M Avg Volume: 797.925K
BUY POINT: $61.05 Volume=875K Target=$68 Stop=$58.28
POSITION: FLR JL – Oct. $60c (64 delta) &/or Stock.
http://www.investmenthouse.com/1daily1.htm”>Learn more about “The Daily” with Stock Picks! – Issued 5 Times Per Week
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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. http://www.investmenthouse.com/1stocksplits1.htm” target=”_top”>http://www.investmenthouse.com/images2/cnbc.gif” width=”39″ height=”31″ border=”0″ alt=”CNBC Interview”>
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
http://www.investmenthouse.com/cc/jwnsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/quote/stkquote.php3?smbl=
JWN”>
JWN (Nordstrom, Inc.)
http://finance.yahoo.com/q/pr?s=jwn”>Company Profile
JWN announced its split for us, and after a split is announced we always like to look for additional opportunities as a stock tends to make a solid run into its split, particularly if it is a leader as is JWN. After moving in a flat, lateral range as a test of its breakout, volume moved higher Tuesday as JWN started higher after the split announcement. We moved in with options; on pre-split plays we often like options as we can leverage our gain with less movement in the underlying stock. We bought some October $60 call options for $4.70. The 54 delta would give them good movement as the stock continued its break higher. It worked out nicely because we also knew that same store sales were due out Thursday, and JWN has been a leader in the higher end department stores. After a modest gain Wednesday, JWN reported those strong sales and shot up $2.67 Thursday. Now it did not reach our target, but with the news we figured it would not get much better near term. Thus we went ahead and sold some of our options for $6.90, banking a 46% gain. We love pre-split plays because they can make us money quickly just as JWN did in this instance. We also love them because we can often play a strong pre-split stock more than once as it heads into its actual split. Great stocks with multiple chances to play them. Now that is fun investing.
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/dstism.gif” width=”360″ height=”208″ border=”1″>
3) TECHNICAL PLAYhttp://investmenthouse.com/quote/stkquote.php3?smbl=
DSTI”>
DSTI (DayStar Technologies–$7.77; -0.04; no options): Semiconductors.
http://finance.yahoo.com/q/pr?s=dsti”>Company Profile
STATUS: Double bottom w/handle. DSTI is setting up for a breakout move that will take it to a new all-time high. Nice 13 week base has set up using the 50 day EMA (7.07) as support as money has been moving in during the pattern as the 6 to 0 accumulation shows (6 up price weeks on rising volume to 0 down price weeks on rising volume). Money flow is surging as well, moving higher ahead of price. A new issue in March 2004. This is an early stage base in a new stock leaving plenty of upside ahead. Excellent base setting up the breakout.
Volume: 148.394K Avg Volume: 262.917K
BUY POINT: $8.42 Volume=394K Target=$10.32 Stop=$7.83
POSITION: – Stock (no option chain).
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
http://www.investmenthouse.com/cc/cydsm.gif” width=”360″ height=”208″ border=”1″>
4) COVERED CALL PLAYhttp://investmenthouse.com/quote/stkquote.php3?smbl=
CYD”>
CYD – China Yuchai International Ltd. is currently trading at $13.11. The July $12.5 Calls (CYDGV) are trading at $1.30. That provides a return of about 6% if CYD is above $12.5 on expiration Friday in July.
http://finance.yahoo.com/q/pr?s=cyd”>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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