Market Rounds Out Week With Gains
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
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Weekend Newsletter for
March 19, 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
Market completes a week of upside.
– Market rounds out week with gains on a calm quadruple expiration
– Utilities drive gains in factory output.
– ECRI eases again, indicating growth has peaked for now but no economic rollover.
– Market likely to retrench some after expiration as NYSE indices test and NASDAQ tries to regroup.
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Market Summary (continued)
The indices all posted gains Friday after an iffy Thursday for NASDAQ and SOX. It was not a huge session as stocks started soft but then rallied back once more, NASDAQ and SOX included. That closed out a week of gains. A week of selling and the market was due a rebound. The NYSE delivered that and more with a trio of breakouts to new post-2002 highs. NASDAQ was up after rolling over Thursday on rising volume, threatening another run lower in its range. SOX bounced; that is about it.
Volume was huge on both NASDAQ and NYSE as the March contracts came to an end and positions were rolled out for the next month. Breadth was just slightly positive as the indices posted gains, but did not add much to the week. Indeed, the daily moves progressively declined to the end of the week. Not atypical in a rally; the market can’t keep posting stronger sessions. It was a record week, however, at least for the small caps and transports as they set new all-time highs.
Quite a change from the prior week when the indices posted a week of losses with NASDAQ threatening a breakdown out of its range and SOX doing just that. The market went from selling on worries about rising long end interest rates and a strong employment report to once more pricing in an early end to the Fed’s rate hikes. Down a week with some distribution on NASDAQ, then up a week with breakouts from DJ30, SP500, SP600.
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=
ARNA”>
ARNA (Arena Pharmaceuticals)
http://finance.yahoo.com/q/pr?s=arna”>Company Profile
Money continues to move around the market, rotating from sector to sector more than lifting all boats. That means some sectors rise while others fall. In late February ARNA was one of the drug and medical stocks forming a nice base over the 50 day EMA. One of our scans turned it up in its base and we put it on the report on 2-23-06. On 2-24-06 it made the move, rallying on strong volume through our buy point. We moved in with some stock positions at 17.15 and some July $15 strike call options at $3.50. We like to move in as a strong stock in a good pattern makes its breakout move. That puts our money into a stock that is going places as opposed to buying one that is ‘value priced’ but could take a long time to move if it ever does.
ARNA had a great pattern, great buying, and was ready to move. Sure enough it continued to rally after the buy on 7-24, moving higher each session through the first week of March even as the market overall fell. It continued into the next week as well. Our initial target was 20.65, calculated base upon ARNA’s past runs after breakouts, and ARNA hit that target on 3-14-06 when it gapped higher but then started to fade. We sold some stock positions for 20.56 and banked some 19+% gain. We also sold some of the option positions for $6.10, a nice 74% gain. We placed our initial target correctly as ARNA needed a breather after that and then faded to test its breakout move. It is still in good shape, fading back on low volume to near support at the 18 day EMA. We will look for ARNA to rebound once more and if it shows good upside volume we will look at additional positions from this strong stock.
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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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/rjfsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
RJF”>
RJF (Raymond James Finl.–$44.66; +0.17; optionable): Splits 3:2 on 3-23-06.
http://finance.yahoo.com/q/pr?s=rjf”>Company Profile
STATUS: Double bottom w/handle. RJF made us some good money on its announcement subsequent run, and now it has corrected and is set up for another run for us into the split. It sold back to the 50 day EMA (42.41) two weeks back, making the last leg lower and jumped up off that key support. It ended the week with a narrow lateral move. Good action, the quiet before the next break higher.
Volume: 259.9K Avg Volume: 355.792K
BUY POINT: $45.22 Volume=534K Target=$53.95 Stop=$43.69
POSITION: RJF HI – Aug. $45c (56 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
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3) TECHNICAL PLAYhttp://investmenthouse.com/indexq.php?smbl=
BWNG”>
BWNG (Broadwing–$12.70; +0.37; optionable): Telecom equipment.
http://finance.yahoo.com/q/pr?s=bwng”>Company Profile
After Hours: $12.66
STATUS: Flying plateau. Nice volume Friday as BWNG moved off the 10 day EMA (12.05). The move did not take it out of its two week lateral move following the early March breakout, but it continues to hold its gains as it consolidates. Looks super. To recap: BWNG is part of the late 1990’s telecom group that is enjoying a resurgence. It gapped higher on consecutive sessions to start the month on strong volume, breaking out from a yearlong base. It has spent the past two weeks moving laterally as the 10 day EMA rises to meet it. Volume has spiked during the consolidation, an indication that buyers continue to move in. Money flow is running hard. Looking for another strong volume session as BWNG moves through the buy point.
Volume: 3.126M Avg Volume: 1.873M
BUY POINT: $12.95 Volume=2.7M Target=$15.55 Stop=$12.04
POSITION: QBG HV – Aug. $12.50c (54 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=
CLF”>
CLF – Cleveland-Cliffs, Inc. is currently trading at $91.27. The April $90 Calls (CLFDR) are trading at $5.30. That provides a return of about 5% if CLF is above $90 on expiration Friday in April.
http://finance.yahoo.com/q/pr?s=clf”>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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