Market Trying To Get Back On Track
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INVESTMENT HOUSE.COMTM
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Weekend Newsletter for
February 19, 2006
Table Of Contents 1) MARKET SUMMARY 2) POST-SPLIT PLAY 3) TECHNICAL PLAY 4) COVERED CALL PLAY
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1) MARKET SUMMARY > >From “The Daily” at InvestmentHouse.com
Low volume pullback ahead of long weekend caps a decent week.
– Stocks soften ahead of long weekend, hurt by oil issues, PPI.
– PPI is hotter than expected, but lower than the month before and year over year core remains low.
– Bernanke parroting Greenspan on curve inversion, unfortunately.
– Market trying to get back on track but the techs keep straggling.
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Market Summary (continued)
Pretty much as expected stocks struggled Friday after a 3-day rebound, the best upside stretch for the market since late January. Some of the catalysts for the upside move reversed as the week wore on. Oil tanked early but rebounded to close the week, helped by the call for a ‘total war’ by Nigerian rebels against foreign oil companies. PPI jumped more than expected, and that continued the worry about the Fed and the yield curve inversion. After a rebound for the week and ahead of a long weekend, that was plenty to send stocks back a bit.
A 3-day bounce is hardly inspiring, but there was some significant movement on the week. SP500 broke back above the late January high, sitting back on top of that level on the Friday close. It still has the January high to top, but the stronger volume move Tuesday to start the bounce was promising. SP600 bounded solidly off the 50 day EMA on Tuesday as well, avoiding a lower low and taking aim on the last high. DJ30 was one of the stars, hanging around, holding on, then making its move to a new post October 2002 high similar to a snowboarder in a snowcross board race. All solid advances; a bit more work to do on SP500, but a solid advance.
Then there is NASDAQ. It was up as well for the week and it recaptured the December high, moving on some stronger volume Thursday as it did. That was a first step, but it is still below the two January highs, the recovery volume was still mediocre, breadth is weaker, and it is just sluggish as it continues to lag on this recovery attempt. SOX is also questionable, clearing the December highs with NASDAQ on Thursday, but then rolling back down Friday and toying again with the 18 day EMA. Still in the uptrend but lacking any pop as well.
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=
ISIL”>
ISIL (Intersil Holdings–$30.31; +0.2; optionable): Semiconductors.
http://finance.yahoo.com/q/pr?s=isil”>Company Profile
After Hours: $30.30
STATUS: Flying plateau. It is definitely a market of individual stocks right now, and though the semiconductors are acting a bit sluggish, ISIL has used that to set up its next move. After an earnings jump higher in late January, ISIL has formed a lateral flying plateau, using the 10 day EMA (29.55) as support. Thursday and Friday volume kicked up and Friday ISIL was starting the breakout move from this lateral consolidation. Market leader with top fundamentals to go along with its pattern. Excellent 4 to 1 accumulation in the base (4 up price weeks on rising volume to 1 down price weeks on rising volume) shows there is enough buying to send it higher once more. Looking for a continued solid move to enter the play.
Volume: 2.234M Avg Volume: 1.937M
BUY POINT: $30.65 Volume=2.5M Target=$35.75 Stop=$28.88
POSITION: UFH GF – July $30c (60 delta) &/or 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.
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
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http://investmenthouse.com/indexq.php?smbl=
GPN”>
GPN (Global Payments–$49.92; +0.55; optionable): Payment systems.
http://finance.yahoo.com/q/pr?s=gpn”>Company Profile
STATUS: Test 50 day EMA. Market leader coming back to test the 50 day EMA (48.06) after a solid run from September to November, a short base, and another run from December through January. It has spent the past three weeks fading back to test that run, holding at the 50 day EMA (48.06) and price support at 48 as well. Volume has started to pick back up on the upside sessions, and Friday was a very solid price/volume move. Money flow is solid and is leading higher. Looking for GPN to continue its rebound this week on continued strong volume.
Volume: 655.6K Avg Volume: 668.53K
BUY POINT: $50.35 Volume=1M Target=$57.95 Stop=$48.78
POSITION: GPN HJ – Aug. $50c (51 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=
NSM”>
NSM (National Semiconductor–$28.35; -0.36; optionable): Semiconductors.
http://finance.yahoo.com/q/pr?s=nsm”>Company Profile
STATUS: Ascending triangle. NSM has set up an 11 week base making higher lows above the 50 day EMA (27.45) below a constant top at 29. Classic triangle that is setting up for a breakout to a 5.5 year high. Huge 5 to 1 accumulation in the base (5 up price weeks on rising volume to 1 down price week on rising volume) shows all buyers and is a strong indication NSM is going to breakout and run well. Strong money flow as well, leading higher ahead of the price. Volume was up Thursday and Friday after being rather dormant this month. That often indicates it is ready for the breakout move. Solid all around.
Volume: 4.151M Avg Volume: 4.302M
BUY POINT: $29.05 Volume=6.5M Target=$33.95 Stop=$27.82
POSITION: NSM HF – Aug. $30c (51 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=
OXPS”>
OXPS – OptionsXpress Holdings Inc. is currently trading at $30.10. The March $30 Calls (QYBCF) are trading at $1.50. That provides a return of about 5% if OXPS is above $30 on expiration Friday in March.
http://finance.yahoo.com/q/pr?s=oxps”>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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