Weekend Newsletter for April 25, 2004
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/042504.htm
1) MARKET SUMMARY
Stocks fight early selling attempt, finish week with steady gain.
– Solid session Friday as market closes a good week, turning the tables on distribution.
– Durable goods orders surge, economy roars after a ‘lull.’
– Base building continues with a solid reversal of the distribution.
– Subscriber Questions.
http://www.investmenthouse.com/1weekendmarketsummary.htm?123 “> 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.
TK (Teekay Shipping–$66.50; -0.75; optionable): Shipping. Splits 2:1 on 5-18-04.
STATUS: 50 day EMA test. Flat base. Transportation stocks are moving well, and Thursday volume shot higher as it responded to the earnings and split announcement. Friday it took a breather as did the rest of the market, holding over the 10 day EMA (65.94) on the low. Looking for it to hold at that level and then start the move higher. A bit early for a classic pre-split run, but with money flow surging ahead of price we are ready to step in on a strong volume move.
Volume: 378.1K Avg Volume: 350.363K
BUY POINT: $67.38 Volume=450K Target=$75.85 Stop=$65.44
POSITION: TK GM – July $65c (64 delta).
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3) Technical Play
CDIS (Cal Dive–$26.85; -0.51; optionable): Oil and gas equipment
STATUS: Cup w/handle. Working on a lower volume handle to its 7 week base that has formed over the 50 day EMA (25.65). Accumulation is solid at 3 to 0 (3 up price weeks on rising volume to 0 down weeks on rising volume), showing us that money moved into the stock even as it based. Money flow is excellent, rallying higher ahead of the stock price. An ‘A’ rated stock for earnings, sales, and technical position. Excellent volume Thursday as it moved up toward the breakout, but volume faded Friday. Looking for that high volume breakout.
Volume: 159.334K Avg Volume: 328.181K
BUY POINT: $28.05 Volume=475K Target=$33.66 Stop=$26.35
POSITION: KPQ IE – Sept. $25c (71 delta) &/or Stock.
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Learn more about our Technical Trader Report!
http://www.investmenthouse.com/1tech1.htm
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4) Covered Call Play
NCEN – New Century Financial Corp. is currently trading at $45.3. The June $45 Calls (UREFI) are trading at $2.60. That provides a return of about 5% if NCEN is above $45 on expiration Friday in June.
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http://www.investmenthouse.com/1coveredcalls1.htm
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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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