May 12, 2002 Weekend Newsletter
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http://investmenthouse.com/weekend/051202.htm “> Read this report online in full color with graphs
1) MARKET SUMMARY
Distribution session waits until Friday.
– Big indexes distribute on second day following rally attempt, a bad sign for the future.
– Smaller issues take on water, retreating with the big boys, a disconcerting change in character.
– Homebuilders failing to make the grade thus far in their corrections.
– The big picture: test of the September lows and then old economy stocks continue to outperform.
-Subscriber Questions.
– Team Trades.
http://www.investmenthouse.com/1weekendmarketsummary.htm “> Click here or on link for our full Weekend Market Summary
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2) Stock Splits
Be sure to read our Stock Splits Manual. 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. Here’s a pre-split play to watch and our current analysis.
YUM (Tricon Global–$63.21; -0.45): Restaurants. Splits 2:1 effective June 18.
STATUS: Has been on a steady trend up, using its 50 day MVA until bouncing up and using the short-term MVA’s since early April. For the last several weeks YUM has set up an ascending wedge, and after gapping up but not doing much on the split announcement, YUM could be ready to go after pulling back and showing a ‘shooting star’ doji over the support of the 18 day MVA (62.51). Looking for an options play with a breakout to a new high. Target: 68.
PLAY: 64.21 on volume of 1 million, and July $60 calls to buy (YUM GL). Stop: 60.
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3) Technical Play
ABF (Airborne Freight–$22.17; +1.14; optionable): Air & Freight.
STATUS: Breakout. Formed the 8-week cup with handle after an ascending wedge breakout in late February. The stock pulled back to the 10 day MVA in the handle, bouncing up from there on Wednesday but waiting for another day to follow through. Volume fell off Thursday on the slight pullback, but ABF sprang from that doji on Friday with volume blasting up to 1.4 million (avg. 633K). Remains a buy on this move, having just beat the buy point in the handle. Money flow and relative strength are breaking out, and money flow has really exploded since late April.
BUY POINT: 22.23 on continued strong volume. A buy on the move up to 23.08. Target=25.75. Stop=20.67 (10 day MVA is at 20.76).
POSITION: Stock and/or August 20c to buy (ABF HD; delta= 0.72).
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http://www.investmenthouse.com/1tech1.htm “> Click here to learn more about our Technical Trader Report
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4) Covered Call Play
DHI – D.R. Horton, Inc. is currently trading at $25.17. The June $25 Calls (DHIFE) are trading at $1.65. That provides a return of about 6% if DHI is above $25 on expiration Friday in June.
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http://www.investmenthouse.com/1coveredcalls1.htm “> Click here to learn more about our Covered Calls Service
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5) IPOs
Japan’s NEC Corp said on Friday an initial public offering for its Elpida Memory joint venture with Hitachi Ltd (6501.T) may be moved forward if conditions improve, giving a further sign of optimism about a chip market recovery.
The news followed word last month from NEC, Japan’s second-largest chipmaker, that Elpida would begin making dynamic random access memory (DRAM) chips at a new state-of-the-art facility in October, earlier than a previously targeted January start-up.
http://www.investmenthouse.com/1ipo.htm “> . . . continued . . .
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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.
Copyright 1997 – 2002 by Online Investment Services, LP. – All Rights Reserved.
