Weekend Newsletter for April 7, 2002
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http://investmenthouse.com/weekend/040702.htm “> Read this report online in full color with graphs
1) MARKET SUMMARY
Market slides lower in fairly pathetic trade.
– Growth stocks still suffering in favor of lower P/E cyclicals.
– Earnings warnings had their week, now earnings reports are ready to get it in gear this week.
– Economic news dominates market.
– Indexes slide for the week.
– Subscriber Questions.
– Team Trades.
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.
ABM (Abm Industries–$36.64; -0.36; optionable): Business services. Splits 2:1 effective 5-7-02.
STATUS: ABM has made a very nice move up the right side of its cup pattern, which dates back to June-July highs at 38.20. ABM broke out of a handle in mid-March and hit a recent high of 37.84, pulling back into another handle from there. It has moved laterally the past week, dipping back today (after hitting an intraday high of 37.31) but holding over its 10 day MVA (36.37). Volume was above average (89,200; average 66,200), but relatively light compared with the volume on the recent moves up. Looking for another breakout, targeting 44.
PLAY: 37.41 on volume of 100,000, with stock. Stop: 35.50.
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3) Technical Play
POT (Potash CP 66.00; +1.26; optionable): Mining, non-metals.
STATUS: Hardly sexy, not even a metal miner. Still, there are some great attributes here. It is in a larger 15-month base, but it just cleared some major resistance at 65 on a good volume surge (244,600; avg. is 115K). Relative strength broke out already, topping the levels back in early 2001 when the stock traded at 77.50. Money flow is huge and price/volume action is excellent.
BUY POINT: 66.40 on continued strong volume in the 200K range. Target=77. Stop=63.50.
POSITION: Stock and/or September 60c (POT IL; low open interest) or September 65c (POT IM) to buy.
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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
FRED – Freds, Inc. is currently trading at $35.44. The May $35 Calls (FMUEG) are trading at $2.25. That provides a return of about 6% if FRED is above $35 on expiration Friday in May.
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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
Investors waiting for the financial markets to settle down before jumping into new IPOs apparently have a little longer to wait. A week into the second quarter and the major markets were pummeled by developments in the Middle East and the beginning of the latest “pre-announcement” season. This volatile combination of circumstances creates a challenging environment for next week’s crop of IPO candidates. With so much uncertainty plaguing the broader markets, underwriters will have to time their offerings well to secure a warm reception in the aftermarket. However, following a week with no deals priced, investors could decide that four deals aiming to raise half a billion dollars is too much to swallow.
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.
