Weekend Issue for September 29, 2002
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1) MARKET SUMMARY
The underlying problem, the economy, reared its head Friday.
– Economic woes move to the big boys and the market can’t handle it.
– GDP tacks on a fraction, Michigan sentiment shows the flipside of the Conference Board’s numbers.
– Small business forum to focus on immediate action to help business investment.
– Ten day MVA proves too much for the indexes.
– 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.
RMCI (Right Management–$24.11; -0.72; optionable): Splits 3:2 on 10-16.
STATUS: Still testing back to the 18 day MVA (24.03). Thursday it looked as if RMCI was ready to move on up off the 18 day MVA after a good pullback, but Friday was not the day for a lot of stocks. It started out well and then came back to close on the 18 day. Volume was very low once again; it appears to be biding its time, setting up for the next rally. We will be ready when it does to catch some of that good upside pop this stock has.
Volume: 68.673K Avg Volume: 152.801K.
BUY POINT: $25.05 (orig. $25.75). Volume=225K Target=$29.75 Stop=$23.65.
POSITION: UHU AD – Jan. $20c (74 delta) and/or Stock.
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http://www.investmenthouse.com/1stocksplits1.htm “> Click here to learn more about our Stock Split Report – Forbes.com Best of the Web Online Edition says: “. . . seek out the Stock Split Report . . .”
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3) Technical Play
ITMN (Intermune–$19.35; -2.13; optionable): Drug Manufacturer.
STATUS: Breakout over the 200 day MVA (30.87). Drugs and healthcare sectors are being used as safe havens in a weak overall market. ITMN surged in early September to the 200 day, and has since moved laterally on lower volume until Friday when it made its breakout over the 200 day MVA on above average volume. We are looking at this as another trade, but will let it run if it has momentum at the target. Nice accumulation since late May at 3 up weeks on rising volume to 1 down week on rising volume.
Volume: 439.141K Avg Volume: 711.136K.
BUY POINT: $31.85 Volume=2M Target=$36 Stop=$29.62.
POSITION: IQY AF – Jan. $30c (65 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
HRB – H&R Block Inc. is currently trading at $41.63. The October $40 Calls (HRBJH) are trading at $3.90. That provides a return of about 6% if HRB is above $40 on expiration Friday in October.
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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
A mountainous legal suit claiming that Wall Street banks and their corporate clients rigged hundreds of initial public offerings has hardly begun, but the most important arguments may have already been made.
Friday is the deadline for the final documents in a motion to throw the case out made by defendants like Goldman Sachs Group Inc. (GS.N) and Credit Suisse Group First Boston (DIR.N) and once hot IPOs like EToys.
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.
Copyright 1997 – 2002 by Online Investment Services, LP. – All Rights Reserved.
