Solid Jobs Report
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
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Weekend Newsletter for
August 7, 2005
Table Of Contents 1) MARKET SUMMARY 2) PRE-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
Good news is bad news because of Fed’s view of prosperity.
– Solid jobs report, increased wages fuel further selling.
– Worries of ‘wage-push’ inflation are only valid because Greenspan thinks so.
– ECRI shows continued growth, modest upswing in inflation pressures.
– FOMC statement about inflation pressures will receive more attention than the rate hike.
– Expecting small and mid-caps to test further ahead of the Fed.
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Market Summary (continued)
A stronger than expected July employment report added downside pressure on top of Thursday’s sell off. Investors were cautious in the pre-market ahead of the report, and when it was released the stronger jobs creation for July, June and May as well as the stronger gains in wages pushed futures lower. Stocks opened lower, sold all morning, tried an afternoon rebound attempt with three separate pushes higher, but they foundered as the close drew nearer and stocks closed near their session lows.
In the end more losses were piled on top of Thursday’s downside, though the point loss and volume were lighter. NASDAQ and SOX managed to hold the 18 day EMA with relative ease while SP500 held the next support level down. Not too bad and something of a silver lining, but the small and mid-cap indices were rocked once more, leading the market lower as they crashed through their 18 day EMA. As noted last weekend, they were getting ripe for a pullback if they put in another strong move after leading the market with the first breakouts in early July as they moved to new all-time highs. They could always turn on a dime, but a test back toward the 50 day EMA after several bounces up off the 10 and 18 day EMA is pretty typical action. They led higher, they are leading lower. Now they have to hold the 50 day EMA to bode well for the market overall.
Good economic news was heralded the past two weeks as the market transitioned between earnings and a flood of economic data. The market responded to the upside with continued gains as the news remained positive. It reached a saturation point as we anticipated, and when that happens the market has a way of turning what would have been viewed as good news just a week ago into a negative. In other words, when the buyers get exhausted the market starts to look at what could derail the move as opposed to continue it. That means taking the negative view of data even if it is overall good. Thus, with the stronger jobs data it was reasoned that more Fed rate hikes than anticipated were coming and that along with record high (in current dollar terms) oil prices had a better chance of derailing the recovery in stocks.
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/apccsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/quote/stkquote.php3?smbl=
APCC”>
APCC (American Power Conversion–$27.09; -0.33; optionable): Surge protection, power backup, etc.
http://finance.yahoo.com/q/pr?s=apcc”>Company Profile
After Hours: $27.66
STATUS: Breakout test. APCC surged higher in late July on a strong earnings report, breaking out of a 15 week double bottom with handle base. Solid 5 to 3 accumulation in the base (5 up price weeks on rising volume to 3 down price weeks on rising volume) shows net buying that set the foundation for a breakout and run. This pullback was on low, below average volume, showing just some profit taking after a strong move. Money flow remains strong, still moving higher even on this test, a very good positive divergence. Looking to step in on the rebound from this first breakout test, one of our favorite entry points.
Volume: 734.376K Avg Volume: 1.111M
BUY POINT: $27.55 Volume=1.4M Target=$32.75 Stop=$26.55
POSITION: PWQ LE – Dec. $25c (70 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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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/ropsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/quote/stkquote.php3?smbl=
ROP”>
ROP (Roper Industries–$76.2; -0.21; optionable): All kinds of machinery. Splits 2:1 on 8-29-05.
http://finance.yahoo.com/q/pr?s=rop”>Company Profile
STATUS: Test 18 day EMA. A nice breakout in early June from a 5 week ascending triangle carried ROP to 79. It fell hard into earnings, tapping the 50 day EMA intraday the day before. It broke higher on the split and earnings, making it back to 79. It settled back on lower volume to the 18 day EMA (75.88) the past week, quieting things down and trading in a tighter range. Strong money flow remains, and looking for volume to jump back up above average as ROP turns up and moves back through the 10 day EMA (76.44). That is our entry point.
Volume: 114.7K Avg Volume: 205.88K
BUY POINT: $76.75 Volume=309K Target=$82.65 Stop=$75.72
POSITION: ROP KO – Nov. $75c (57 delta).
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/flrsm.gif” width=”360″ height=”208″ border=”1″>
3) TECHNICAL PLAYhttp://investmenthouse.com/quote/stkquote.php3?smbl=
FLR”>
FLR (Fluor Corp.–$63.98; -1.07; optionable): Construction and construction engineering.
http://finance.yahoo.com/q/pr?s=flr”>Company Profile
STATUS: Breakout test. Good results in late July sent FLR higher and out of a 21 week cup with handle base. Strong volume on the move, but then the market started to stutter step and FLR then moved laterally while the 10 day EMA (63.40) played catch up. Friday FLR reached down and tapped the 10 day on the low and rebounded to recoup some losses. Nice breakout from a solid pattern sporting solid 6 to 3 accumulation (6 up price weeks on rising volume to 3 down price weeks on rising volume), showing plenty of buyers during the base. This move has taken it to a new all-time high. After this modest, low volume pullback it will be ready to continue the breakout move. Money flow is strong, still moving higher as the stock makes this lateral move. Just going to let it make the test and then move in when it shows a higher volume rebound.
Volume: 421.2K Avg Volume: 638.5K
BUY POINT: $64.85 Volume=775K Target=$72.95 Stop=$63.21
POSITION: FLR AM – Jan. $65c (58 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/quote/stkquote.php3?smbl=
CMC”>
CMC – Commercial Metals Co. is currently trading at $28.70. The September $30 Calls (CMCIF) are trading at $0.95. That provides a return of about 8% if CMC is above $30 on expiration Friday in September.
http://finance.yahoo.com/q/pr?s=cmc”>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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