May 5, 2002 Weekend Newsletter
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http://investmenthouse.com/weekend/050502.htm “> Read this report online in full color with graphs
1) MARKET SUMMARY
Downtrend pushes the large cap indexes back down, the Nasdaq perilously so.
– Same story: Large cap indexes swoon as smaller indexes hold the line.
– Economy is recovering, but not fast enough to save technology stocks at these prices.
– Not much to hold Nasdaq up, broader market moving higher.
– 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.
FAST (Fastenal–$84.02; +0.14; optionable): Home improvement stores. Splits 2:1 effective 5-13-02.
STATUS: Still looking good. FAST made a great move in April, bouncing from the 50 day MVA (then 72.50, now 77.96) in early April and then making another move after forming a lateral consolidation that tested its 18 day MVA (currently 82.03). It made a new high at 86.48 recently, pulling back over the past week to test the former consolidation highs and the 18 day. Thursday FAST started back up as volume spiked up again to huge levels. Friday it slowed to a doji on much lighter volume (though still strong at 390k; avg. 266k). Still looking for a continued bounce. Targeting 95.
PLAY: Over 85, with August $80 calls to buy (FQA HP).
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http://www.investmenthouse.com/1stocksplits1.htm “> Click here to learn more about our Stock Split Report – Forbes.com Best of the Web Online Edition says: “. . . seek out the Stock Split Report . . .”
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3) Technical Play
SOTR (Southtrust Corp.–$26.99; +0.05; optionable): Regional southeast bank.
STATUS: Cup w/handle. Still moving in the handle of a 8-month cup with handle/ascending wedge and looking solid. The stock broke out in mid-March and rallied to 27 where it failed to take out the former high. After that it fell to the 50 day MVA and has moved up that support, forming the ascending wedge. As we said before, we really, really like this combination pattern. Thursday and Friday SOTR spent time at the breakout point on above average volume (1.5 million; avg. is 1.25 million). It may pull back toward 26.50 before it makes its move, but we think it is close to making the breakout. Money flow continues moving up ahead of price, and relative strength has already broken out. Price/volume action in the base favors accumulation with 7 rising weeks on rising volume versus 5 falling weeks on rising volume.
BUY POINT: 27.42 on volume of 1.87 million or more. Target=32.96 (initial). Stop=25.50.
POSITION: Stock and/or September 25c to buy (SHQ IE; delta 91).
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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
HI – Household Intl., Inc. is currently trading at $57. The June $55 Calls (HIFK) are trading at $5.00. That provides a return of about 6% if HI is above $55 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
Underwriters are bringing a touch of entertainment to the new issues market. Following the solid performance of Lin TV (ticker: TVL) last week, movie theater chain Regal Entertainment (proposed ticker: RGC) plans to go public and raise $306 million. Expect to see lead manager Credit Suisse First Boston make a big production out of the offering. WestPark Capital offers Intra Asia Entertainment (proposed ticker: PAK), manager of an amusement park in China. Also on the calendar, Printcafe Software (proposed ticker: PCAF), which develops software solutions for the printing industry, is set for its second attempt at an IPO. The company originally filed in March 2000, but withdrew its offering in June of last year. This is one of three companies that filed this year after scrapping their first IPO effort. After shareholders filed a lawsuit against Dov Pharmaceuticals and the underwriters of its offering, IPO investors could use something to smile about.
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.
