Market Set Up Nicely For New Quarter
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
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Weekend Newsletter for
April 2, 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
Quiet end to the quarter leaves stocks set up well.
– Stocks coast quietly out of the week and quarter.
– January and February PCE tame, indicating Q4 jump was indeed storm related.
– Michigan sentiment jumps past expectations
– Chicago manufacturing jumps and factory orders making a comeback.
– Market set up nicely for the new quarter.
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Market Summary (continued)
It had the potential to be a wild session what with the end of the quarter and GOOG’s addition to the SP500 to officially start after the close. GOOG’s market cap is so high that all other stocks in the SP500 would undergo at least some selling as index funds make room for GOOG and to reflect the percentage makeup of the index. Thus a stock could be in great shape, but its status as an SP500 member would subject it to selling pressure simply because a mega cap stock was being added to the index.
Thus SP500 lagged all session, struggling to hold positive (it did not) as its stocks suffered continued selling pressure all session. It was not, however, a wild session. Indeed it was a rather boring session with all but the mid and small cap indices closing lower. No major losses, mind you, just modest trading that took a late dip or otherwise NASDAQ would have closed positive.
The session started out decently. The market struggled Thursday after the Q4 core PCE was revised higher to 2.4% from 2.1%. Inflation, famine and pestilence were sure to be on the horizon and the market stumbled around once more. Friday the February core PCE fell back to 1.8%, well within the Fed’s ‘comfort zone.’ That news buoyed stocks and they opened higher. Then the Michigan sentiment report jumped past expectations and the Chicago manufacturing support did the same. That offset the early optimism. That along with continued high oil prices (though lower after Iran said oil was not a weapon and Nigeria tensions eased) and rising bond yields put the kibosh on the move, and after the stronger start stocks wandered lower and lower all session.
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=
NVDA”>
NVDA (Nvidia Corp)
http://finance.yahoo.com/q/pr?s=nvda”>Company Profile
We have been consistently investing long-term and trading NVDA as well. It is a strong leader and we like to concentrate on strong leaders. Thus we monitor them for new entry opportunities as they continue their runs. NVDA set up another entry point starting February. It gapped higher to 50 but then sold back. That caught our attention. It then started to build higher highs up the 18 day EMA while it bumped into 50 on the highs. This triangle with the higher lows was building pressure for a breakout from below. We put the next buy point and option choice on the report (50.15, clearing that resistance).
On 3-21 NVDA hit the buy on a tremendous volume surge. We moved in with stock and with some July $50 call options at $5.70. That strong volume move through resistance tells us that a lot of investors with a lot of money wanted more shares of NVDA. Sure enough, after a one-day pullback NVDA started on a 6 session run higher. Wednesday (3-29) NVDA hit our initial target at 57.10. We banked part of our 14% stock gain and sold some of our options at $11 for a strong 92% gain. It likely needs a pause here, but we are willing to let this winner ease back to near support and then move higher once again. We love following the leaders; they are one way to gain an edge on the market.
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/indexq.php?smbl=
BER”>
BER (W.R. Berkley–$58.06; +0.64; optionable): Property & casualty insurance. Splits 3:2 on 4-5-06.
http://finance.yahoo.com/q/pr?s=ber”>Company Profile
STATUS: Test breakout. Volume surged Friday as BER rebounded through the 10 and 18 day EMA (57.69). This looks to have completed the test of its strong February to mid-March run. A perennial leader splitting Wednesday. Looking to capture the upside into and through the split, letting BER ride higher for us as long as it will on this move.
Volume: 845.9K Avg Volume: 649.589K
BUY POINT: $58.32 Volume=655K Target=$66.90 Stop=$57.21
POSITION: BER GK – July $55c (73 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=
DTAS”>
DTAS (Digitas Inc.–$14.40; +0.21; optionable): Global marketing services.
http://finance.yahoo.com/q/pr?s=dtas”>Company Profile
After Hours: $14.38
STATUS: Ascending base. DTAS has set up the current 12 week base over the 50 day EMA (13.67), making higher and higher lows up that key support level while finding resistance at 14.50. Those higher lows pushing up against that lid build pressure for a strong breakout. Excellent 6 to 2 accumulation in the base shows plenty of strong buying that is setting up the breakout move. Strong fundamentals growth and a solid pattern with relative strength ready to breakout as well, a good corroboration of the price move.
Volume: 457.146K Avg Volume: 899.516K
BUY POINT: $14.88 Volume=1.3M Target=$17.95 Stop=$13.88
POSITION: DQB IC – Sept. $15c (49 delta) or DQB IV – Sept. $12.50c (73 delta, low OI) &/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=
LUFK”>
LUFK – Lufkin Industries Inc. is currently trading at $55.44. The May $55 Calls (UFREK) are trading at $3.70. That provides a return of about 6% if LUFK is above $55 on expiration Friday in May.
http://finance.yahoo.com/q/pr?s=lufk”>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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