September 8, 2002 Weekend Newsletter

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1) MARKET SUMMARY

Another bounce without a lot of substance.

– Intel rally boosts indexes back to resistance on low volume.
– Government employment numbers not in sync with reality.
– Weak rally to resistance ahead of 9-11 sets up more downside.
– Subscriber Questions.

http://www.investmenthouse.com/1weekendmarketsummary.htm “> Click here or on link for our full Weekend Market Summary

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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. Here’s a pre-split play to watch and our current analysis.

FBP (First Bancorp Holding–$40.04; +0.44; no options): Regional bank. Splits 3:2 on 9-30-02.

STATUS: Flat base. FBP continues to move in a three week flat base following a strong surge off the 50 day MVA (38.41). It tried to make a move earlier last week, but the choppy market would not let it get its feet. It held the pattern, however, and we will see if the pre-split momentum can get it moving up for us. About the only thing we don’t like about this play is the lack of options on a $40 stock.

Volume: 51.7K Avg Volume: 68.043K.

BUY POINT: $41.45 Volume=99K Target=$47.65 Stop=$38.55.

POSITION: – Stock (no option chain).

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3) Technical Play

CLE (Claires Stores–$22.11; +1.23; optionable): Apparel.

STATUS: Double bottom w/handle. CLE made a breakout move from its 9-week base Friday, though volume was not quite as good as we would want to see. Still, volume was excellent Wednesday on the first big move up, and the entire week showed above average volume; when that happens we know there is a lot of interest. Accumulation weeks outnumber distribution weeks in the base 4 to 2, a very good indication of the strength of the buying. Relative strength broke out on the move, a key component, and money flow is racing up ahead of price. We want to grab hold and let it take us higher with it.

Volume: 275.7K Avg Volume: 244.891K.

BUY POINT: $22.41 Volume=365K Target=$25.94 Stop=$20.84.

POSITION: CLE BD – Feb. $20c (70 delta) and/or Stock.

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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

NCEN – New Century Financial Corp. is currently trading at $31.14. The October $30 Calls (UREJF) are trading at $3.00. That provides a return of about 7% if NCEN is above $30 on expiration Friday in Ocotber.

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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

Citigroup Inc. (C.N), the world’s largest financial services firm, defended itself on Friday amid the recent steady stream of criticism of its businesses — from stock research to investment banking.

“This has been a pretty lousy period to go through,” Chief Executive Sandy Weill said, referring to a string of negative headlines ranging from the credibility of its stock research to its role in the collapses of Enron Corp. (ENRNQ.PK) and WorldCom Inc. (WCOEQ.PK).

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.
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