July 7, 2002 Weekend Newsletter
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http://investmenthouse.com/weekend/070702.htm “> Read this report online in full color with graphs
1) MARKET SUMMARY
Broad advance to celebrate independence.
– Rally continues after no major July 4 incident.
– Sets stage for higher test.
– Unemployment rises but workweek and overtime climbs.
– Two seasons swinging into gear: earnings and options expiration.
http://www.investmenthouse.com/1weekendmarketsummary.htm “> Click here or on link for our full Weekend Market Summary
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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. Here’s a pre-split play to watch and our current analysis.
WHI (W. Holding Company–$23.4; +0.25; no options): Splits 3:2 on 7-11-02.
STATUS: After a stellar move on the breakout in June, WHI has tanked back to the 50 day MVA in three short sessions on some strong volume. Friday it rallied slightly from that level on that low half session volume. With the stock’s good move after the split announcement it shows the ability to move. The split is Thursday, and that gives WHI a good chance to rally back into the split after this pullback.
Volume: 230.1K Avg Volume: 68.545K
BUY POINT: $21.31 Volume=85K Target=$24.25 Stop=$19.82
POSITION: Stock (no option chain).
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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
OVRL (Overland Storage–$16.14; +0.55; optionable): Computer data storage.
STATUS: Cup w/handle. OVRL is one of those smaller tech stocks that has been quietly outperforming the technology and the market as it works through a 5-month cup with handle base. Accumulation in the base is excellent with 8 weeks of price gains on rising volume versus just 3 weeks of price losses on rising volume. That shows very solid net accumulation of the stock. It looks very strong despite a rather wild session Wednesday when it tested down to the 50 day on the open and rebounded smartly. The news was a shortfall in Q4 revenues, but it also announced a new major system customer. The market apparently liked what it saw on sum, and the market has the final say on all such things. We will look for a strong breakout on strong volume to take positions.
Volume: 83.2K Avg Volume: 163.409K
BUY POINT: $16.85 Volume=270K Target=$20.45 Stop=$14.45
POSITION: QOJ KV – Nov. $12.50 call (78 delta) and/or stock.
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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
FRED – Freds, Inc. is currently trading at $35.19. The August $35 Calls (FMUHG) are trading at $2.20. That provides a return of about 6% if FRED is above $35 on expiration Friday in August.
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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
Tyco International Ltd. (TYC.N) delivered its final tally on Wednesday from the sale of CIT Group Inc. when the conglomerate said it would take a $2.4 billion charge in the June quarter related to that split off.
The charge, which was larger than Wall Street expected, represents the difference between CIT’s $6.8 billion carrying value on Tyco’s books and the $4.4 billion Tyco received from selling its 100 percent stake in the financial services firm on Monday, Tyco spokesman Gary Holmes told Reuters.
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.
Copyright 1997 – 2002 by Online Investment Services, LP. – All Rights Reserved.
