Time For Rates To Rise?
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INVESTMENT HOUSE.COMTM
Informing Investors Around The World
Read In All 50 States And Over 100 Countries
Weekend Newsletter for
February 12, 2006
Table Of Contents 1) MARKET SUMMARY 2) POST-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 finds a bit of character, rebounds after downside follow through.
– Stocks under pressure again as jobs report rekindles notion Fed is not almost done.
– Impressive comeback from intraday shakeout sets up market for a recovery but it has to find some strength.
– Treasury starts selling the 30 year bond again. Time for rates to rise?
– Does the trade gap need to be fixed?
– Market shows the ability to come back but will have to show ability to rally once more.
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Market Summary (continued)
You are not going to hear us say the market is out of hot water or any other rather ridiculous characterization, but we will say the market showed something we did not expect, i.e. a rebound after morning downside follow through to Thursday’s failed rally attempt. The week was not going well before the Friday morning selling; it started lower from the prior Friday, sold some more, attempted a narrow relief move Wednesday, and then rolled over Thursday after a strong morning that saw stocks gap higher only to collapse.
The early selling pushed SP600 down to its 50 day EMA, a support level it had not seen in 6 weeks. NASDAQ and SP500 were extending their losses further below their 50 day EMA after closing below those levels once more on Thursday. SOX, the clear leader in the rally, even tested its 18 day EMA. Breadth was overwhelmingly downside early with NASDAQ posting almost 3 to 1 declines. The market leaders were even starting to crack with financials breaking below their 18 day EMA and chip leaders doing the same. It was at the point where it looked as if the leaders were going to finally give up and join in the breakdown. Indeed, on the week they were down more than the overall market.
The session was just over an hour old and the downside move accelerated sharply. Then it bounced, what at the time we thought a relief bounce that would take it up to the 15 minute moving average. It broke through, tested, and then kept moving higher. We were waiting for a stall that would send it back down, but it held through lunch and accelerated in the last two hours and into the close. There was not much volume and breadth was mediocre (not bad, however, given the early session hammering), so the rebound was not a clear reversal from the prior selling. It could have been a shakeout of the sellers that sets up the next rebound; as noted, the leaders were selling through near support and then recovered. That shows some of the weaker holders sold out, and that always helps harden a stock for more upside.
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/cohsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
COH”>
COH (Coach–$35.47; -0.15; optionable): Handbags, accessories.
http://finance.yahoo.com/q/pr?s=coh”>Company Profile
After Hours: $35.55
STATUS: Double bottom w/handle. COH has formed an 11 week base over the 200 day SMA (32.96) as part of a larger 7.5 month ascending triangle base. Solid accumulation in the current pattern, showing net buyers and setting up the breakout. COH has formed a nice handle to the base the past week, using the market selling to make a low volume pullback to test and hold near support at the 18 day EMA (35.30). Nice money flow to go along with the accumulation. Ready to move to a new all-time high after this handle completes. The doji Friday suggests it may be ready.
Volume: 1.658M Avg Volume: 2.715M
BUY POINT: $36.88 Volume=4.1M Target=$42.95 Stop=$35.15
POSITION: COH EG – May $35c (56 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.
For post-splits, we can play them as we would pre-splits (very short term), but we prefer to stretch our horizons, playing the trend. When playing options, we look further out, 2 or more months at least. We let the trend carry us along if there is one, but we will also take profits if the technical pattern degenerates, e.g., breaks a trendline. The main difference between post-splits and pre-splits plays is that we really have to like the pattern. Pre-splits can run right before their splits even with poor technical indicators. For post-splits, we are looking at the stocks from more of a longer term “would I buy this stock at this juncture?” position. Now there are times when a hot stock splits and investors pile in to get in while the stock is ‘cheaper.’ We play those, but with more of a short-term, pre-splits mentality in that we will be ready to get out fast if the momentum fades.
Remember, everything we do has to pass muster with the market that day … don’t fight the market on these plays.
http://www.investmenthouse.com/1stocksplits1.htm” target=”_top”>http://www.investmenthouse.com/images2/cnbc.gif” width=”39″ height=”31″ border=”0″ alt=”CNBC Interview”>
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 post-split play to watch and our current analysis.
Chart by http://www.stockcharts.com”>StockCharts.com
http://www.investmenthouse.com/cc/cellsm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/indexq.php?smbl=
CELL”>
CELL (Brightpoint Inc.)
http://finance.yahoo.com/q/pr?s=cell”>Company Profile
We love to play split stocks because they are typically leaders and they give us many times to play them either before they announce, the pre-split move, and then post-split when they put together their next solid technical pattern. CELL is a market leader, and it split to start 2006. That was half way through a new base it was forming and we had an eye on it (it was a split play after all) and let it complete its pattern. When it looked as if CELL was about to complete its pattern we put the play on the report. It broke higher on volume on 1-19, the move we were looking for. We entered with some stock positions at 20.83 and some July $20 strike call options at $3.40. It took a day off the next session as stocks often do after a solid move, but then it took off, making a nice run to end January. Then it made a test of the near support at the 18 day EMA over the next week, typical action after a nice move. On 2-8 it gapped higher and surged $3.79 to 25 on volume. That took it to our initial target and we took some solid 22.5% stock gain and sold some of our options at $6.0, a nice 88% gain. Strong stock in a strong uptrend so we are letting it continue to work for us.
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/cvdsm.gif” width=”360″ height=”208″ border=”1″>
3) TECHNICAL PLAYhttp://investmenthouse.com/indexq.php?smbl=
CVD”>
CVD (Covance–$55.5; -0.5; optionable): Research services.
http://finance.yahoo.com/q/pr?s=cvd”>Company Profile
STATUS: Breakout test. CVD exploded higher in mid-January as it cleared a 20 week cup base, rallying to 58 on the high. It has used the past three weeks to test that explosive move, falling on lower volume to hold near support at the 18 day EMA (55.17) and filling the gap up in late January. Solid leader that used the market selling to consolidate a gain. Very nice test of the breakout to a new all-time high. Volume started to creep higher Thursday and Friday, so we are looking for CVD to resume the breakout move this week.
Volume: 452K Avg Volume: 428.546K
BUY POINT: $56.11 Volume=643K Target=$64.95 Stop=$54.95
POSITION: CVD HK – Aug. $55c (53 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/vlosm.gif” width=”360″ height=”208″ border=”1″>
4) COVERED CALL PLAYhttp://investmenthouse.com/indexq.php?smbl=
VLO”>
VLO – Valero Energy Corp. is currently trading at $50.65. The March $50 Calls (VLOCJ) are trading at $3.50. That provides a return of about 6% if VLO is above $50 on expiration Friday in March.
http://finance.yahoo.com/q/pr?s=vlo”>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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PREMIUM SERVICES
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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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