NASDAQ, SOX Lead Big Finish
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
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Weekend Newsletter for
January 8, 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
Stocks surge Friday, capping an amazing week with a strong follow through.
– NASDAQ, SOX lead big finish to big first week of 2006.
– Jobs report ‘just right’ for the market, but longer term we still face big issues.
– Bond curve turns flatter on jobs report, ‘conspiracy theory,’ potential Chinese diversification.
– This week like the start of the year all over.
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Market Summary (continued)
Maybe the jobs data was just right, maybe the retail news was better than expected. Maybe there was just a lot of money itching to get into the market. Friday stocks started stronger, hesitated just a bit, then blasted off on excellent volume and breadth as technology continued its lead. Most sectors came with it, however, as the rotation from earlier in the week turned into wholesale buying.
Volume surged on NASDAQ as tech and semiconductors led the charge. Breadth was strong. Leadership remained excellent with semiconductors and wireless-related stocks really charging hard. All indices broke to new post-2002 highs except for SOX, but it broke out to a new 21 month high. Tuesday night we said we would be looking for a follow through session starting Friday. The market delivered on the earliest possible session, the fourth after the rally started, and it was an impressive follow through.
The market tried to soften midday after that first surge out of the blocks on the weaker yet strong employment report. Retail news continued to improve. As discussed Thursday, holiday sales were once again stronger than expected, and Friday Best Buy wowed analysts with the results from its holiday sales: flat panel sales up triple digits, gift cards up 20%, web sales (we used their buy on the web, pick up at the store option for late gifts) up 40%, and MP3 sales up double digits as well. Oil moved over $64/bbl (64.21, +1.42), and that tried to kill off the move after the initial surge. It did not work, however, as stocks rallied to lunch, paused and then rallied into the last hour. They moved laterally once there, but closed out the day at the session highs.
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=
BGC”>
BGC (General Cable Corp.)
http://finance.yahoo.com/q/pr?s=bgc”>Company Profile
This was one of our favorite play types: buying in on the first test of a strong breakout. We like to put our money into these plays because when a stock rebounds on strong volume off the test of the breakout, that shows the big money is still buying into the stock even at the higher level. In early November BGC, a plain old, basic wire and cable maker, broke sharply higher out of a 12 week triangle. It came back over the next three weeks to test the move, holding the 50 day EMA, a key support level. It started creeping back up and that got us watching. On 11-29 BGC cleared the tops of the former base on strong volume; we moved in on that move, buying some stock positions at $17.28 and some February $17.50 call options at $1.15. It then shot higher the next two sessions. We let it ride because it never came back. Instead it just moved laterally to test and then shot higher again. That is the sign of a strong stock. We let it run and test, through December, but it was showing excellent relative strength to the market so we let it go. Last week it surged once more as we would expect a leader to do. Friday it rallied and hit our target. The stock has been so strong decided to take part of the gain and let the other half continue to run for us. Thus we sold some stock at $21.03 for a 21.7% gain and some options at $3.60 for a 213% gain. BGC is still trending up the 10 day EMA, so we could easily see our options turn us a 300% or more gain before this move runs out of steam.
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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Listen to Stock Split Report Editor Jon Johnson’sstock split interview on CNBC-TV [ http://www.investmenthouse2.com/cntdir.asp?name=JonJohnson-B” target=”_new”>Broadband | http://www.investmenthouse2.com/cntdir.asp?name=JonJohnson-D” target=”_new”>Dial-up ]
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/mcrssm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
MCRS”>
MCRS (Micros System–$51.35; +1.87; optionable): Technical and system software.
http://finance.yahoo.com/q/pr?s=mcrs”>Company Profile
STATUS: Test 50 day EMA. After splitting in February, MCRS rallied into June and then formed the current 6 month double bottom with handle base. It broke out in early December but then was caught in the selling, fading back to the 50 day EMA (48.21), holding that level for a week, and then rebounding Friday on a strong shot of rising, above average volume. Strong 9 to 5 accumulation in the base (9 up price weeks on rising volume to 5 down price weeks on rising volume) shows the buying necessary to set up a breakout and run higher. Excellent money flow is surging higher, complementing the accumulation. A market leader ready for a new all-time high. We are ready to start the play on a move through the buy point and will look to add when MCRS tests that move.
Volume: 480.52K Avg Volume: 258.934K
BUY POINT: $51.75 Volume=350K Target=$59.55 Stop=$49.05
POSITION: MFK FJ – June $50c (58 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=
CMED”>
CMED (China Medical Technologies–$36.31; -0.78; optionable): Products for treatment of solid cancers and benign tumors.
http://finance.yahoo.com/q/pr?s=cmed”>Company Profile
After Hours: $36.31
STATUS: Cup w/handle. A new issue in August, CMED has set up its second base, using the 18 day EMA (33.77) as support. A neat little 6 week pattern sporting great 3 to 1 accumulation (3 up price weeks on rising volume to 1 down price weeks on rising volume) and surging money flow. Strong fundamentals match the great pattern. A new issue that has a lot of gains ahead of it. After a bit more lateral move this week it will be ready for the next leg higher. Not much more to say about it, but we think this is going to be a big winner for us.
Volume: 692.501K Avg Volume: 792.533K
BUY POINT: $37.65 Volume=1.2M Target=$45.25 Stop=$35.48
POSITION: QCY FH – June $40c (50 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=
FRED”>
FRED – Freds, Inc. is currently trading at $15.36. The February $15 Calls (FMUBC) are trading at $1.05. That provides a return of about 5% if FRED is above $15 on expiration Friday in February.
http://finance.yahoo.com/q/pr?s=fred”>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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