Market Pushes Higher
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
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Weekend Newsletter for
November 20, 2005
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
SP500 joins the breakout to new 2005 highs after up and down session.
– Volatile expiration but stocks post another gain as SP500 hits new 2005 high.
– Market pushes higher, anticipating economic growth despite Fed, oil, gold, yield curve.
– Another light week for economic data on a shortened trading week as market tests new 2005 highs, works on continued year end run.
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Market Summary (continued)
Stocks roared out of the gate in a continuation of NASDAQ’s Thursday break to a new 2005 high (notice how the last two big moves came on Thursday?) with SP500 joining the breakout. The early rally was sparked by excitement over the breakout, some solid foreign market action, and some solid tech earnings. It was expiration Friday, however, and despite the upside momentum, volatility returned. Indeed, it was too strong a move and it burned itself out 45 minutes into the session. Stocks turned over and SP500 gave up its breakout.
Stocks spent the next four hours moving laterally with SP500 below its 2005 highs. As the session moved into its last hour, the bullishness returned and SP500 moved back through resistance to post a new closing high for 2005 and since the October 2002 low, joining NASDAQ with that breakout. Semiconductors were strong as well, gapping higher with SOX (2.5%) moving toward its 2005 highs as well. The small caps (0.54%) joined in as well, though they too were below the 2005 highs.
Volume was strong given expiration, topping 2B on NASDAQ. Breadth was so-so at 1.5:1. It was not a powerful session, but we saw the strength on Thursday when NASDAQ made its breakout and started the process. The modest breadth did not provide a lot of new breakouts, just an overall continued move higher by the market. No complaints, however, as the market heads higher on its year end run.
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=
MRVL”>
MRVL (Marvell Technology Group)
http://finance.yahoo.com/q/pr?s=mrvl”>Company Profile
We love playing stocks that are leaders both in fundamentals and technical patterns. MRVL fills the bill, and we are always watching for opportunities to buy into this winner, concentrating funds on a strong stock that makes us a lot of money. In early November MRVL was setting up once again for us, ready to move out of a 9 week base that formed following a nice July and August run. Early in November we saw MRVL make the next, move breaking out of that base on strong volume. We moved in with some stock at $48.71 and some February $47.50 call options at $4.90 per option. The price for the options was good with a 58 delta; that would give us some good movement on the option as MRVL continued higher. That is what MRVL did. It rallied over 50 and then took a pause last week, fading back to the 10 day EMA on lower volume. This move was typical: MRVL surges then tests near support on lower volume. It also occurred right before its earnings report Thursday afternoon. We used the dip to take some more positions Thursday just ahead of earnings. After the close Thursday MRVL announced super earnings and shot higher. That is why we love playing leaders that are solid on all fours. The stock gapped higher Friday and rallied. When it peaked midmorning on that first run we took part of the gain at 57.20, a nice 17% gain on our stock. We also cashed in some options at $10.90, a great 122% gain. We are letting the rest of the positions run because MRVL is a leader and is likely to continue the breakout move
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
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http://investmenthouse.com/quote/stkquote.php3?smbl=
WFMI”>
WFMI (Whole Foods Market–$144.59; -0.35; optionable): Natural food stores. Splits 2:1 on 12-28-05.
http://finance.yahoo.com/q/pr?s=wfmi”>Company Profile
After Hours: $144.57
STATUS: Test 50 day EMA. WFMI is gyrating up and down on top of the 10 day EMA (143.96), and we are just being patient and waiting for a volume move off this level. Trade has dropped the past three sessions; any bump in trade on a good price move and we will start a position. To recap: WFMI disappointed some on earnings and gapped lower to the 50 day EMA (137.71) on the news. It has rebounded since, moving back up through the 10 day EMA. Has some momentum now and some volume as it heads toward the prior high at 152. Looking to use options to capture the move. A run to the target lands us a 58%ish gain.
Volume: 994.263K Avg Volume: 1.094M
BUY POINT: $145.22 Volume=1.6M Target=$155.95 Stop=$143.24
POSITION: FMQ BI – Feb. $145c (51 delta).
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/quote/stkquote.php3?smbl=
CHRS”>
CHRS (Charming Shoppes–$12.85; -0.09; optionable): Apparel stores
http://finance.yahoo.com/q/pr?s=chrs”>Company Profile
STATUS: Breakout test. Strong retailer that broke out in early November from an 8 week double bottom with handle base. Excellent 6 to 3 accumulation in the pattern set up the breakout, complemented by the strong money flow. Nice low volume test the past week, holding at the 10 day EMA (12.63), setting up the next leg higher in the breakout. Solid fundamentals to go along with the strong technical pattern.
Volume: 667.331K Avg Volume: 974.167K
BUY POINT: $13.22 Volume=1.2M Target=$15.95 Stop=$12.52
POSITION: QSR DV – Apr. $12.50c (58 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/quote/stkquote.php3?smbl=
SCHN”>
SCHN – Schnitzer Steel Industries Inc. is currently trading at $31.89. The January $30 Calls (SQQAF) are trading at $3.20. That provides a return of about 5% if SCHN is above $30 on expiration Friday in January.
http://finance.yahoo.com/q/pr?s=schn”>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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