June 30, 2002 Weekend Newsletter
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http://investmenthouse.com/weekend/063002.htm “> Read this report online in full color with graphs
1) MARKET SUMMARY
Volume spikes as funds of all types shift their holdings.
– Massive quarter ending volume unable to spark large cap move.
– Big indexes hit resistance and fall back.
– Small cap index pattern getting a bit toppy.
– Economic news shows continued slight improvement.
– Subscriber Questions.
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.
BER (W.R. Berkley–$55.00; +0.04; optionable): Splits 3:2 on 7-03-02.
STATUS: BER has not been blowing anyone out of the water as its recent action has been volatile, running up from 54 to 60 and then right back down last week. It is just three sessions from the split, however, and on Friday it showed a tight doji on some massive volume. It looks as if it is ready to run back up from here ahead of its split. Looks ready to make us some money going into the split.
Volume: 588.2K Avg Volume: 141.545K
BUY POINT: $55.31 Volume=200K Target=$59.55 Stop=$53.50
POSITION: BER HJ – Aug. $50 c (88 delta, low OI). We are looking at options given the price and target right before the split.
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3) Technical Play
COL (Rockwell-Collins–$24.60; -0.21; optionable): Defense.
STATUS: Cup w/handle. Defense continues to be a hot sector, and after a correction the past two months, it looks ready to move back up. COL was a new issue last June. It corrected back immediately, building a cup w/handle base that led to a breakout in early May. Then it corrected back immediately with the rest of the market, forming the current 2-month cup w/handle base. Volume has been excellent the past two weeks, surging in anticipation of the breakout. The accumulation weeks in the short base is 3 up to 1 down. Very solid accumulation on excellent volume with two recent volume spikes on up sessions. Money flow is excellent and relative strength is already breaking out.
Volume: 615.6K Avg Volume: 452.909K
BUY POINT: $27.75 Volume=680K Target=$33.45 Stop=$24.85
POSITION: COL JX – Oct. $22.50c (85 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
LOW – Lowes Companies, Inc. is currently trading at $45.4. The August $45 Calls (LOWHI) are trading at $2.55. That provides a return of about 5% if LOW is above $45 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
The broader markets retreated time and time again in the first half of 2002, but that didn’t prevent the new issues market from making solid advances. More companies managed to go public in the first and second quarters than in the same six months of 2001. Underwriters priced 47 new offerings, 15% more than last year at this point and just 40.5% behind the 79 priced in all of 2001. At first glance the improvement appears small, but against the backdrop of retreating financial markets the modest uptick in IPO volume suggests an underlying level of strength.
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.
