New Home Sales Nip Expectations
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
Read In All 50 States And Over 100 Countries
Weekend Newsletter for
January 29, 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 ponders slow GDP then continues its move.
– Auto sales, defense spending sink Q4 GDP but not the market.
– GDP slowdown likely temporary, but it points out continuing issues for economy.
– New home sales nip expectations. An uptick in an overall slowdown.
– FOMC front and center even as large caps close in on January highs.
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Market Summary (continued)
Futures were burning early Friday on the heels of some strong earnings from BRCM, PG, WFR and even MSFT, building on the other more recent offerings from CAT and many small and mid-cap issues. Japan was on fire as well, up over 3% on its session as technology leaders are providing just what the market wanted, i.e. strong outlooks not only support their current prices but future price increases as well.
Then along came the 8:30ET preliminary GDP report, and its 1.1% reading was a shocker. Futures were knocked back on the news, but they did not cave. Indeed, they managed to recover some of the lost ground and the market started to the upside as if it had no worries about what happened in Q4. Indeed, the market looks forward not backward, and it looked right past the report and put in the move we said in the Thursday report it needed to make, i.e. SP500 taking out the December highs and the trendline and NASDAQ putting a clear break between it and the December highs.
The move recaptured all of the prior Friday’s losses as investors looked past the past and even overlooked some of the future, specifically oil prices. Yep they were back up (67.76, +1.50) as the daily worries about Iran’s reaction to potential economic sanctions bobbed back and forth. In any event, SP500 made a solid move as large caps took the lead Friday, particularly in technology. Large cap techs got the earnings season off to a rough start, but with MSFT and BRCM earnings NASDAQ 100 managed to rally as well, taking out the December closing high.
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/brcmsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
BRCM”>
BRCM (Broadcom Corp.)
http://finance.yahoo.com/q/pr?s=brcm”>Company Profile
We have enjoyed making money off BRCM for much of 2005, and that continued into 2006 when we saw it form a short double bottom to end December and start 2006. That run was great. Then we saw it get hit on Friday expiration, setting up another opportunity ahead of earnings and after an undue sell off. It managed to hold the 10 day EMA on that selling, a good indication it was nothing major. Indeed, the next Monday we were back in, taking some positions as the stock showed a nice doji on the candlestick chart at the 10 day EMA. We purchased some stock positions at 57.25 and some May $57.50 call options at $5.60.
BRCM edged higher the next three sessions, and then gave us what we expected, a strong earnings report and a stock split. Well, as you know it gapped higher. When a stock moves like this we are always going to take some of the gain because our options jump in value due to the volatility component shooting through the roof. Friday morning we sold our options for $12.30; it was tough because they were trading so fast we did not know if our limit order would be hit. We did not want to risk a market order so we put in the limit order and got hit. The stock rallied a bit more and we could have made another $1 to $2 before it peaked out and then rolled back down, but a 120% gain in four sessions will often do.
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/psyssm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
PSYS”>
PSYS (Psychiatric Solutions–$32.80; +0.14; optionable): Specialized health services.
http://finance.yahoo.com/q/pr?s=psys”>Company Profile
STATUS: Breakout test. Firming up over the 10 day EMA (32.25) to end the week. Looks to be completing its test of the strong break higher two weeks back. Just need to see volume jumping as it resumes the breakout move. To recap: PSYS broke out from a 7 week base in early January, surging on strong volume. It is making its second test of that move, easing back the past three sessions on much lower volume but holding onto its gains. It does not want to give the move up, a good sign. Strong money flow is leading higher and a good relative strength breakout shows the move has some guts.
Volume: 430.817K Avg Volume: 622.994K
BUY POINT: $32.88 on the rebound Volume=800K Target=$38.95 Stop=$31.77
POSITION: BYU FZ – June $32.50c (56 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
http://www.investmenthouse.com/cc/abism.gif” width=”360″ height=”208″ border=”1″>
3) TECHNICAL PLAYhttp://investmenthouse.com/indexq.php?smbl=
ABI”>
ABI (Applera Corp-Appliaed Biosystems–$28.93; +0.96; optionable): Technologies & products to support genomics research.
http://finance.yahoo.com/q/pr?s=abi”>Company Profile
STATUS: Ascending base. Strong volume Friday as ABI broke out of an 8 week base that used the 50 day EMA (26.94) as support. Strong earnings the past week gave it the push to make the breakout. Strong 3 to 1 accumulation shows net buying, setting the foundation for the breakout run. Money flow is strong as well, surging higher ahead of price. Relative strength moving with the stock, a good confirmation of the breakout move. Looking to move in as ABI continues the break higher and then again on the first test.
Volume: 1.844M Avg Volume: 1.261M
BUY POINT: $29.18 Volume=1.4M Target=$33.95 Stop=$27.75
POSITION: ABI FF – June $30c (52 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
http://www.investmenthouse.com/cc/ususm.gif” width=”360″ height=”208″ border=”1″>
4) COVERED CALL PLAYhttp://investmenthouse.com/indexq.php?smbl=
USU”>
USU – USEC Inc. is currently trading at $15.44. The March $15 Calls (USUCC) are trading at $1.20. That provides a return of about 5% if USU is above $15 on expiration Friday in March.
http://finance.yahoo.com/q/pr?s=usu”>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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