Weekend Newsletter for August 3, 2003
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/080303.htm
1) MARKET SUMMARY
Stocks not ready to move higher.
– Jobs report disappoints and the market cannot get over it.
– Expanding national manufacturing sector is great news, but no match for the jobs report.
– Buyers refuse to commit after overall good economic news, indicating an important test of the trading range to come.
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.
EBAY (Ebay–$105.28; -2.02; optionable): Online auctions. Splits 2:1 on 8-28-03
STATUS: Testing the 50 day MVA. One of our pre-announcement plays that has made us a lot of money, EBAY now shifts into the pre-split phase. It is a leading stock that has doubled since the October bottom. On that run it has made three 50 day MVA tests, this being the fourth one. This move started after earnings. Strong stocks that are going to continue their moves will find support at the 50 day MVA (105.59) as institutions step in to support it. While we are still waiting to see if EBAY does hold up at the 50 day, we want to be ready for a strong volume jump off of that level for additional positions.
Volume: 7.811M Avg Volume: 6.559M
BUY POINT: $107.05 Volume=9M Target=$120 Stop=$104
POSITION: QXB JA – Oct. $105c (54 delta) &/or Stock.
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http://www.investmenthouse.com/1stocksplits1.htm
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3) Technical Play
CYMI (Cymer–$39.68; -0.79; optionable): Chip equipment (lasers)
STATUS: Testing the breakout. CYMI broke out of a 6 month reverse head and shoulders base in mid-July, and is now moving laterally the past week over the 10 day MVA (39.28), testing that move. Volume has fallen back below average as it does, a sign that there are not many sellers as it works a bit lower. Accumulation in the base is solid at 9 to 6. Money flow remains very strong and relative strength broke out and is ready to do the same. Despite all the market turmoil of late, CYMI is holding up extremely well. Want to see a high volume break from here.
Volume: 1.264M Avg Volume: 1.658M
BUY POINT: $40.88 Volume=2.5M Target=$49 Stop=$38.05
POSITION: CQG KH – Nov. $40c (54 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
FMT – Fremont General Corp. is currently trading at $12.64. The September $12.5 Calls (FMTIV) are trading at $1.30. That provides a return of about 10% if FMT is above $12.5 on expiration Friday in September.
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Learn more about our Covered Calls Service!
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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