Stocks Continue Relief Bounce
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
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Weekend Newsletter for
April 16, 2006
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
Techs lead modest relief bounce into the weekend.
– Stocks fend off rising rates, continue the relief bounce into the holiday weekend.
– Retail sales rebound, Michigan sentiment higher but rates jumping along with gas.
– After softening, leading indicators have firmed, indicating no recession, for now.
– Trying to avoid the 1970’s.
– Pullback leaves stocks in position to bounce with earnings.
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Market Summary (continued)
NASDAQ continued its modest, low volume bounce off the 50 day EMA test, leading the market higher Thursday ahead of a 3-day weekend. All major indices moved higher, but the techs and small caps had the decisive advantage. Retail sales were in line, Michigan preliminary sentiment topped expectations by a nose, and some decent earnings helped keep the Wednesday ‘momentum’ going despite the 10 year bond topping 5%, oil topping $70 (70.82, +0.73), gasoline futures surging further ($2.11/gallon, +0.02), and Fed governor Kohn worrying about demand and a ‘narrow margin of unused resources’ (Phillips Curve talk, a.k.a. I never saw an expansion I liked). You have to wonder how long the consumer can be sanguine with gasoline hitting $2.70/gallon so early in the season, but thus far it has not stalled enthusiasm. If oil hits $75/bbl, however, we could see the consumer choke point, particularly if that coincides with $3/gallon gasoline.
Thursday such thoughts were on the back burner as those few in the market were more upbeat. It was not enough to change the landscape much. Volume was very low once more. Breadth was decent on NASDAQ but negative on NYSE. SP500 could not clear its 50 day EMA and SOX failed a run at that level as well. NASDAQ and SP600 continued their bounces off support, but NASDAQ did not recover its breakout point. Basically it was no change in position from Wednesday with the indices still having to shake off the Tuesday distribution.
Leaders continued to hold pretty darn well with tests of the 18 day EMA and 50 day EMA the prior two sessions yielding rebounds Thursday. As with the indices there was no major change, but the ability to hold support and take a breather is always a good sign for a continued rise. With earnings starting in earnest this week the pullback is still a good thing, and the fact that many stocks held support (along with NASDAQ and SP600) keeps the upside potential alive.
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=
GYMB”>
GYMB (Gymboree–$28.22; +1.01; optionable): Children’s apparel.
http://finance.yahoo.com/q/pr?s=gymb”>Company Profile
STATUS: Breakout test. Taking another look at GYMB as it makes a nice test of its gap higher just over a week back. It formed a 9 week ascending base with a very tight, flat lateral move to end March. That is what we were watching for the move higher when it gapped up on strong volume. It came back to test that move last week, testing lower Wednesday toward the 18 day EMA (26.62), almost filling the gap before rebounding to close above the 10 day EMA (27.21). Thursday it held the 10 day and bounced on rising, average volume. Nice breakout, nice test, nice resumption of the breakout, moving to a 7 year high. Relative strength broke out as well, a good corroboration of the price move. Ready to move in as GYMB continues higher on the breakout run.
Volume: 709.114K Avg Volume: 632.184K
BUY POINT: $28.65 Volume=700K Target=$33.95 Stop=$27.00
POSITION: GQU HE – Aug. $25c (65 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
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http://investmenthouse.com/indexq.php?smbl=
BLUD”>
BLUD (Immucor–$30.45; +0.04; optionable): Diagnostic testing. Splits 3:2 on 5-16-06.
http://finance.yahoo.com/q/pr?s=blud”>Company Profile
STATUS: Cup. Still holding up, testing the breakout attempt on Tuesday. Filled that gap, showing a doji Thursday over the 10 day EMA (29.88). Looks ready to continue upside. To recap: BLUD has formed a 7 week cup base over the 50 day EMA (29.02) acting as the handle to a larger 11 month cup with handle. Solid volume last week as BLUD rallied up toward the breakout, and solid volume Tuesday on the announcement. It could not hold the move given the market, but very strong and ready for the breakout move. Solid 3 to 1 accumulation (3 up price weeks on rising volume to 1 down price week on rising volume) in this short handle, showing plenty of buying.
Volume: 279.062K Avg Volume: 355.471K
BUY POINT: $31.45 Volume=528K Target=$36.95 Stop=$29.45
POSITION: QMQ IF – Sept. $30c (63 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=
NTRI”>
NTRI (Nutrisystem–$45.32; -0.21; optionable): Weight loss systems.
http://finance.yahoo.com/q/pr?s=ntri”>Company Profile
STATUS: Double bottom w/handle. NTRI was a hot stock in 2005 and made us some excellent money. After that run it needed to consolidate, and we got out to let it set up once more. It is now looking ready to try a breakout from a 10 week base that formed around the 50 day EMA (42.74). It rallied well to end March, then came back this month to test that move, holding the 18 day EMA (44.98) last week. Volume jumped Wednesday on an upside session, showing there is ongoing accumulation in addition to the excellent 4 to 1 accumulation in the base (4 up price weeks on rising volume to 1 down price week on rising volume). After this pullback we are looking for a bounce on strong volume to once more set NTRI on to another all-time high.
Volume: 531.704K Avg Volume: 1.274M
BUY POINT: $45.95 Volume=1.5M Target=$55.00 Stop=$44.04
POSITION: NSI II – Sept. $45c (55 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=
JOYG”>
JOYG – Joy Global Inc. is currently trading at $65.68. The May $65 Calls (JQYEM) are trading at $3.80. That provides a return of about 5% if JOYG is above $65 on expiration Friday in May.
http://finance.yahoo.com/q/pr?s=joyg”>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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