Weekend Newsletter for August 10, 2003
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/081003.htm
1) MARKET SUMMARY
If Friday was a rally, the market needs some real rest.
– Blue chips continue to cruise while techs continue to struggle below resistance.
– Fed meets this week to talk rates among improving economic environment.
– Indexes start heading in opposite directions as SOX adds weight to the Nasdaq troubles.
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.
MMSI (Merit Medical Systems–$25.82; +0.12; optionable): Medical instruments. Splits 4:3 on 8-15-03
STATUS: Testing the breakout. Still a nice breakout test, holding the 18 day MVA (25.27) on the intraday lows and rebounding on the close. There is some resistance at 26, and we want to see MMSI smash through that on volume. MMSI broke out of a 10 month cup with handle base two weeks back and then added some fuel to the fire with a split announcement. The stock rallied from 23 to 28 and is now in a modest pullback to test the move. Huge money flow and a relative strength breakout.
Volume: 76.45K Avg Volume: 122.25K
BUY POINT: $26.72 Volume=183K Target=$32 Stop=$25.55
POSITION: RMQ JE – Oct. $25c (64 delta) &/or Stock.
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3) Technical Play
CB (Chubb–$65.52; +0.12; optionable): P&I Insurance
STATUS: Cup w/handle. CB is moving in a nice tight handle to a 9 week base showing excellent 3 to 1 accumulation (3 up price weeks on rising volume versus 1 down price week on rising volume). An excellent pattern with solid money flow and relative strength. Very nice as some insurers are looking to benefit from rising interest rates.
Volume: 1.522M Avg Volume: 1.833M
BUY POINT: $66.06 Volume=2.7M Target=$75.97 Stop=$63.04
POSITION: CB JM – Oct. $65c (57 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
NTE – Nam Tai Electronics, Inc. is currently trading at $20.6. The September $20 Calls (NTEID) are trading at $2.20. That provides a return of about 9% if NTE is above $20 on expiration Friday in September.
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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 – 2003 by Online Investment Services, LP. – All Rights Reserved.
