Stocks Rally to the Close
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
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Weekend Newsletter for
November 6, 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
Market pauses, sort of, after a solid week of gains.
– Nice easy session as stocks test some, rally to the close.
– Employment surveys again contradict during a period of transition.
– Inflation’s future still questionable but enough to keep the Fed going.
– Stocks setting up well for a continuation of the rally next week.
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Market Summary (continued)
The character of the market can change in a hurry, at least that is the way it often appears to the casual observer (and indeed the more seasoned investor). Friday stocks were weaker, but even in that weakness they sold only modestly and then rallied in the last half hour. That shows the change in character: when buying is slow stocks refuse to give back gains (showing very few sellers), and they close with an upside flair.
It was not long ago that stocks sold off no matter what the news was, and quite frankly, most of the news was bad. It was so gloomy we noted almost nightly how sentiment was reaching levels that could turn the market. It was not, however, an overnight transformation. You all were there each session from mid-October when the market was going through that bottoming process, taking a step forward and then getting swatted right back. That kind of grinding action along with the gloom crescendo worked to weed the market pretty well, getting rid of enough marginal players to set the stage for the rebound. The market was edging higher as it built the bottom, but to hear the financial stations you would think it was heading down into the inferno.
Thus when the volume surged and stocks broke higher with the leaders running interference, it seemed as if a switch was thrown one day and stocks rallied. We know that was not the case, but we also know that when the gloom was high and the news kept getting worse we were seeing strong stocks move higher. More than that we were buying into those moves because we saw the bottoming ongoing and we know that when you see the moves you have to act regardless of what your guts are telling you. When the move really got some legs under it this week we had the luxury of watching our positions run higher, pushed by those piling into the market. .
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/quote/stkquote.php3?smbl=
COHU”>
COHU (Cohu–$24.37; +0.51; optionable): Semiconductor equipment.
http://finance.yahoo.com/q/pr?s=cohu”>Company Profile
STATUS: Cup. Excellent volume to end last week as COHU moved off the 50 day EMA (23.11), working on the right side of its 15 week base. This pattern formed after the July gap higher on strong earnings. COHU sold back to fill that gap, finding bottom in mid-October. Outstanding 7 to 0 accumulation in the pattern (7 up price weeks on rising volume to 0 down price weeks on rising volume) is complimented by surging money flow. Looking to move into positions as COHU continues higher. Solid action from this stock that is sporting solid fundamentals to go along with the pattern.
Volume: 503.6K Avg Volume: 185K
BUY POINT: $24.72 Volume=235K Target=$29.65 Stop=$23.22
POSITION: QCH BE – Feb. $25c (51 delta, low OI) &/or Stock.
http://www.investmenthouse.com/1daily1.htm”>Learn more about “The Daily” with Stock Picks! – Issued 5 Times Per Week
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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.
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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/nihdsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/quote/stkquote.php3?smbl=
NIHD”>
NIHD (NII Hldgs–$84.30; -0.25; optionable): Wireless telecom. Splits 2:1 on 11-22.
http://finance.yahoo.com/q/pr?s=nihd”>Company Profile
STATUS: Cup w/handle. NIHD has run a long way in 2004 and 2005, and it needed a breather. It surged higher in late July and then fell into the current 13 week lateral move, the last 5 weeks forming a short cup with handle as it came back late in the week to test the 10 day EMA (82.36) on lower volume. Very strong run and we are looking to capitalize on this pullback to give us a good run into the actual split. One of the top rated stocks in the market in terms of earnings growth and its strength.
Volume: 415.2K Avg Volume: 950K
BUY POINT: $85.45 Volume=1.1M Target=$96.55 Stop=$82.25
POSITION: QHQ AQ – Jan. $85c (50 delta) or QHQ CQ – Mar. $85c (49 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/quote/stkquote.php3?smbl=
KG”>
KG (King Pharmaceuticals–$16.12; -0.03; optionable): Drugs.
http://finance.yahoo.com/q/pr?s=kg”>Company Profile
STATUS: Cup w/handle. A very nice, well-formed base the past 8 weeks formed over the 50 day EMA (14.85). This is consolidating a strong move from April, and is actually part of a larger 21 month pattern. Accumulation is a strong 4 to 1, strong money flow, and a relative strength breakout last week. This is a great little base ready to give way to another breakout and run higher.
Volume: 1.43M Avg Volume: 2M
BUY POINT: $16.65 Volume=3M Target=$19.98 Stop=$15.55
POSITION: KG DC – Apr. $15c (68 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/mntsm.gif” width=”360″ height=”208″ border=”1″>
4) COVERED CALL PLAYhttp://investmenthouse.com/quote/stkquote.php3?smbl=
MNT”>
MNT – Mentor Corp. is currently trading at $53.82. The December $55 Calls (MNTLK) are trading at $2.10. That provides a return of about 6% if MNT is above $55 on expiration Friday in December.
http://finance.yahoo.com/q/pr?s=mnt”>Company Profile
http://www.investmenthouse.com/1coveredcalls1.htm”>Learn more about our Covered Call Tables – 8 Tables Updated 5 Times Per Week
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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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