Weekend Newsletter for April 28, 2002
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http://investmenthouse.com/weekend/042802.htm “> Read this report online in full color with graphs
1) MARKET SUMMARY
Weak consumer sentiment smothers early bounce attempt as bearish ways continue.
– No bounce as Nasdaq suffers worst week since September.
Stocks of all sectors were hit Friday. Many sectors and their leaders are holding the line, but the market is eroding around them.
– Economic numbers mean little to investors as earnings continue to disappoint.
– Market selling hard and the dollar with it. Are they saying the recovery is bogus or just not that great?
– 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
Be sure to read our Stock Splits Manual. 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.
PRHC (Province Healthcare–$37.16; +0.12; optionable): Hospitals. Splits 3:2 effective 5-1-02.
STATUS: Thursday PRHC made the move over its down trendline and February highs. PRHC broke out from a “flying w” double bottom (right leg higher and the left) earlier this month, and after testing the breakout (and its 200 & 50 day MVA’s, at 32.60), PRHC started this run. It rested Friday, showing a doji on sharply reduced volume of 822,200 (avg. 676,500). Looking for a continued run into the split, and with this strong sector and the strong break over the trendline (which dates back to late 2000), we will look for continued strength through the split. Riding positions to the initial target of 40, and if we get a test of the trendline we can look at new positions.
PLAY: Riding current positions. We can look at new or additional positions if there is a test back toward 36. On a move back up from that support, June $35 calls to buy (PUH FG). The aggressive can look at positions on a move over 37.70 from here.
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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
FIX (Comfort Systems USA–$4.85; +0.01; no options): Construction contractor.
STATUS: Cup w/handle. FIX is in a 4-month cup with handle after and recently hit a 52-week high after a nice move off of its 2001 low starting back in September. The stock broke out of the cup in early April on massive volume, but for the past two weeks volume has tapered off to well below average levels other than two above average volume spikes, the last occurring on Friday as the stock moved up in the handle off of the 18 day MVA (4.73) (164K; avg. is 145K). Excellent buying and huge money flow complement excellent price/volume action that shows 6 accumulation weeks to one distribution week during this handle.
BUY POINT: 5.07 on volume of 225K or more. Target=6.96. Stop=4.60
POSITION: 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
ROAD – Roadway Express Inc. is currently trading at $30.61. The June $30 Calls (EJQFF) are trading at $1.85. That provides a return of about 4% if ROAD is above $30 on expiration Friday in June.
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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
Already the second quarter is on target to out pace the first quarter in terms of deal flow. So far seven companies have gone public in April, nearly halfway towards matching the 16 pricings in Q1 with two months remaining in the quarter. New issues are pricing at a rate of one to three deals per week. Ten new offerings made this the busiest week of the year for new filings. Tyco filed a $7 billion offering for its financing business, CIT Group (proposed ticker: CIT) and St. Paul Cos. filed to take its newly created reinsurance unit, Platinum Underwriters (proposed ticker: TBA), public.
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.
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