Market Tries For New Highs
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
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Weekend Newsletter for
March 5, 2006
Table Of Contents 1) MARKET SUMMARY 2) POST-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 again faces down bad news but then lets a nice recovery get away.
– Market overcomes another Intel disappointment but then gives it away.
– Economic data continues to show gains and declines.
– Market faces a boatload of economic data, tries to set up to once more to clear resistance.
– Pessimism growing even as market tries for new highs.
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Market Summary (continued)
Once more Intel disappoints, pre-announcing Thursday before the open that you could take its previous 2006 guidance and toss it in the trash. Apparently most investors had already done that. Futures dove lower just ahead of the open as the word disseminated and it looked pretty grim. The market opened and stocks opened lower as well, but they immediately started the rebound. By lunch the indices were turning positive. SOX was lagging, but it too overcame Intel and was in the green as well.
Volume was stronger on NASDAQ, a good indication as it rallied through the late January high, continuing the much improved price/volume action. Volume was lower on NYSE, more of the same weaker price/volume action this week. Nonetheless, SP500 moved back up to the Monday high. The market took an afternoon pause, but then that pause turned into a deeper pullback. That pullback continued through the afternoon. SOX was the laggard, and it proved to be the anchor chain that pulled the rest of the market back.
There was no breakdown at all, just more of the same seen the past two weeks. The higher volume turnaround (to the downside) on NASDAQ is not great action as that shows sellers jumped on the move higher and overwhelmed the buying. That always deserves attention just as a high volume rebound from selling piques interest in further upside. Clearly there was some nervousness with Bush in Pakistan and the fact that it was the weekend with tensions in Nigeria, Pakistan, Iran, Iraq, Venezuela, etc. The ‘interesting times’ we live in keep things at issue each weekend.
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
http://www.investmenthouse.com/cc/abaxsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
ABAX”>
ABAX (Abaxis, Inc.)
http://finance.yahoo.com/q/pr?s=abax”>Company Profile
Sometimes you have to look beyond the well-known stocks to find solid performers that can make money for you. The market got choppy in January and February, but we kept looking for stocks that had strong fundamentals (specifically sales and earnings growth) and were riding out the market, going about their own business. ABAX was one of these. It is in the drug diagnostics sector, and had formed a nice 10 week base above the 50 day EMA. In late January it was finishing its base but then dumped to the 50 day EMA hard one session when it reported earnings. They were solid, but the market was selling earnings reports. We kept watching ABAX because the report was very solid.
Sure enough it rebounded the next two sessions, jumping off the 50 day EMA on strong volume. Having not given up on it we entered the play with some stock positions at 19.90 and some May $17.50 strike call options at $3.70. We like to pair up our purchase like this. The options give us great gains when a stock breaks out and rallies; they rise faster than the stock price. We use the stock positions for the price appreciation, but we can also use them to sell calls against when a strong run runs out of momentum and needs to come back and test near support. We can sell call options close to or just below the stock price, and when the stock drops to support and holds we buy them back for less, pocketing the difference. Kind of like renting out our stock while it takes a breather from the upside.
ABAX did not take much of a breather, however, continuing up the 10 day EMA for the next five weeks. Slow and steady but solid. Friday it hit our initial target at 23.25 and we took some 16% stock gain and sold some of the options at $5.90 for a 59% gain. We like to do that as well because it basically pays for our position and we can then let the stock work more for us as long as it keeps its uptrend going. ABAX is showing no weakness and we will let it ride higher until it peaks out, showing us a doji on the candlestick chart on low volume. At that point we will be ready to take some more option gain and also ready to sell some call options if it turns down from there. Using these methods we can lock in gain and then make money from our positions by working both sides of the play, both up and down. Finding fundamentally strong stocks in solid patterns and knowing when to move in is the key to multiplying your gains using these techniques.
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.
For post-splits, we can play them as we would pre-splits (very short term), but we prefer to stretch our horizons, playing the trend. When playing options, we look further out, 2 or more months at least. We let the trend carry us along if there is one, but we will also take profits if the technical pattern degenerates, e.g., breaks a trendline. The main difference between post-splits and pre-splits plays is that we really have to like the pattern. Pre-splits can run right before their splits even with poor technical indicators. For post-splits, we are looking at the stocks from more of a longer term “would I buy this stock at this juncture?” position. Now there are times when a hot stock splits and investors pile in to get in while the stock is ‘cheaper.’ We play those, but with more of a short-term, pre-splits mentality in that we will be ready to get out fast if the momentum fades.
Remember, everything we do has to pass muster with the market that day … don’t fight the market on these plays.
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Here’s a post-split play to watch and our current analysis.
Chart by http://www.stockcharts.com”>StockCharts.com
http://www.investmenthouse.com/cc/cwtrsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
CWTR”>
CWTR (Coldwater Creek–$22.07; -0.27; optionable): Retail clothing stores, etc.
http://finance.yahoo.com/q/pr?s=cwtr”>Company Profile
After Hours: $21.80
STATUS: Cup w/handle. Volume has moved back above average the past two weeks as CWTR completed the right side of its 14 week base. It has eased back to end last week, coming to test the 10 day EMA (21.82) and form the handle, the final shakeout of the last sellers to put demand ahead of supply. Then the stock is cleared to make the breakout. Solid 4 to 2 accumulation in the base (4 up price weeks on rising volume to 2 down price weeks on rising volume) shows strong buying, setting the foundation for the breakout. CWTR needed this consolidation after a good run to end the year, letting it set up for the next breakout to a new all-time high. Top fundamentals to match.
Volume: 1.571M Avg Volume: 1.263M
BUY POINT: $22.81 Volume=1.9M Target=$27.45 Stop=$21.39
POSITION: UCJ GX – July $22.50c (52 delta) &/or Stock.
Learn more about our Stock Split Report and how we have made gains of 321% with our powerful stock split plays!
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Chart by http://www.stockcharts.com”>StockCharts.com
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3) TECHNICAL PLAYhttp://investmenthouse.com/indexq.php?smbl=
ASPV”>
ASPV (Aspreva Pharma–$26.61; +0.94; optionable): Biotechnology.
http://finance.yahoo.com/q/pr?s=aspv”>Company Profile
After Hours: $26.59
STATUS: Breakout test. ASPV blasted higher in January and really took off in early February, surging out of a 6 month base. After that strong move it needed a breather and it took it the past five weeks, forming a small cup with handle that used the 18 day EMA (24.92) on the low as support. It recovered and moved in a very tight, flat range the past two weeks on low volume, and then started higher Friday on strong trade. Strong 3 to 0 accumulation in the recent pattern, showing all buying as it consolidates the gain. Strong money flow is surging as well. Looking for that volume to continue as ASPV moves through the buy point. Solid fundamentals with its nice pattern.
Volume: 384.397K Avg Volume: 348.682K
BUY POINT: $27.25 Volume=523K Target=$32.75 Stop=$25.65
POSITION: QOS GE – July $25c (66 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=
CNQ”>
CNQ – Canadian Natural Resources, Ltd. is currently trading at $60.50. The April $60 Calls (CNQDL) are trading at $3.90. That provides a return of about 6% if CNQ is above $60 on expiration Friday in April.
http://finance.yahoo.com/q/pr?s=cnq”>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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