Oil Demand Fades
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
Read In All 50 States And Over 100 Countries
Weekend Newsletter for
May 14, 2006
Table Of Contents 1) MARKET SUMMARY 2) PRE-SPLIT PLAY 3) TECHNICAL PLAY 4) COVERED CALL PLAY
http://ichart.yahoo.com/v?s=^ixic”> http://ichart.yahoo.com/v?s=^dji”>
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
Everything getting sold off. Fast sell off, fast turn?
– Further selling in commodity and industrial stocks takes SP500, SP600 below their 50 day EMA as well.
– Nigerian pipeline explosion can’t compete when oil demand fades.
– Michigan sentiment monthly drop the worst in 12 years.
– Everyone suddenly scared of inflation.
– Market sentiment moving in two directions.
– Correction versus the end of the post-crash run.
– The leaders left standing trying to set up for a rebound as market getting oversold, but the selling has yet to show signs of letting up.
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Market Summary (continued)
Stocks got off on the wrong foot Friday on news of a Nigerian pipeline explosion killing almost 200. Futures were lower, following through on the Thursday plunge lower. Aside from the human tragedy, the initial concern was the rebels were stepping up their intensity. As it turns out, that was not the case. Indeed, there was some good news in that the workers that were captured the day before were released. Back at home, the US trade deficit was smaller than expected, helping appease those claiming the trade gap will ultimately bring higher interest rates and Egyptian-like plagues upon our economy.
No blood red waters, no fire raining from the sky. No, no biblical plagues, but the action to end the week had the feel of it. Stocks started lower and went even lower in a hurry. Mid-morning stocks bounced, recovering lost ground for just over an hour. We expected some short covering ahead of the weekend and after that initial surge lower the market bounced into lunch. An early afternoon fade and then another short covering bounce. That did not hold either, and stocks faded once more, closing at session lows.
Volume jumped on NYSE as the recent leading commodities, materials, machinery, and industrial stocks sold. NASDAQ was lower, another indication the tech selling is getting a bit washed out. Breadth was again sharply negative on both NYSE and NASDAQ. SP500 and SP600 blew through their 50 day EMA while NASDAQ plowed lower again. NASDAQ tried to show some relative strength and SOX was even positive into early afternoon. Some of the big name techs that sold hard of late actually managed a positive close. That suggests the techs are getting a bit sold out, having avoided the Memorial Day rush and selling early. Overall, however, the techs folded up the tent as well, and by the close they were at session lows.
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/vshsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
VSH”>
VSH (Vishay Intertechnology–$16.41; -0.42; optionable): Semiconductors and passive electronic components.
http://finance.yahoo.com/q/pr?s=vsh”>Company Profile
STATUS: Test breakout. VSH used last week’s late selling to test its early May breakout from a nicely formed 13 week reverse head and shoulders base. Strong volume on the break higher as earnings came in strong. Volume got a bit out of hand Friday as VSH fell further back, but held the 18 day EMA (16.37) on the close. Outstanding 5 to 1 accumulation shows heavy buying during the base. After this test it will be ready to continue the break higher.
Volume: 3.487M Avg Volume: 1.477M
BUY POINT: $16.81 Volume=2.2M Target=$20.31 Stop=$16.12
POSITION: VSH JC – Oct. $15c (69 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).
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.
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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 pre-split play to watch and our current analysis.
Chart by http://www.stockcharts.com”>StockCharts.com
http://www.investmenthouse.com/cc/hocsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
HOC”>
HOC (Holly Corp.–$79.94; +0.33; optionable): Oil and gas refining. Splits 2:1 on 6-2-06.
http://finance.yahoo.com/q/pr?s=hoc”>Company Profile
STATUS: Test 18 day EMA. Nice higher low at the 18 day EMA (79.03) last week as the market sold. Showing excellent relative strength versus the market and even many of the energy stocks. Strong run in March and April as HOC broke out. It peaked at 85 in April and then formed the current 5 week base, using the 50 day EMA (75.12) as support. Nice test of the breakout, setting up the next run higher.
Volume: 852.7K Avg Volume: 479.86K
BUY POINT: $82.35 Volume=720K Target=$98.50 Stop=$79.00
POSITION: HOC IQ – Sept. $85c (47 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/lmnxsm.gif” width=”360″ height=”208″ border=”1″>
3) TECHNICAL PLAYhttp://investmenthouse.com/indexq.php?smbl=
LMNX”>
LMNX (Luminex–$16.42; -0.38; no options): Medical instruments (biological testing).
http://finance.yahoo.com/q/pr?s=lmnx”>Company Profile
After Hours: $16.47
STATUS: Breakout test. Explosive move higher in late April and early May on strong earnings. The move took LMNX out of a 13 week base formed using the 50 day EMA (14.77) as support, making higher lows along that level. Nice break higher, nice test back to the 10 day EMA (16.33) the past week as the market sold off. An excellent set up for a resumed break higher from this leader looking for a new 4 year high.
Volume: 325.877K Avg Volume: 169.092K
BUY POINT: $17.05 Volume=250K Target=$20.50 Stop=$16.21
POSITION: – Stock (no option chain).
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/xsm.gif” width=”360″ height=”208″ border=”1″>
4) COVERED CALL PLAYhttp://investmenthouse.com/indexq.php?smbl=
X”>
X – U.S. Steel Group is currently trading at $70.33. The June $70 Calls (XFN) are trading at $4.10. That provides a return of about 6% if X is above $70 on expiration Friday in June.
http://finance.yahoo.com/q/pr?s=x”>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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