Weekend Newsletter for August 4, 2002
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http://investmenthouse.com/weekend/080402.htm “> Read this report online in full color with graphs
1) MARKET SUMMARY
Another round of dank economic numbers skid the indexes lower.
– Indexes lose footing on another round of weak economic data.
– Recession worse than thought. Does that mean a better recovery?
– Settling back toward the July lows on lower and lower volume.
– More downside this week then a bounce or outright failure.
– 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
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.
SSD (Simpson Manufacturing–$57.54; -1.31; no options): Small tools. Splits 2:1 on 8-19-02.
STATUS: Trend reversal. Tested lower Friday, closing at the 50 day MVA as volume backed off to very low levels. There is a lot of support at this level from previous prices and the convergence of just about all of the moving averages. We are looking for a bounce from here. We are lowering the buy point given Friday’s action as we want to capture as much of the upside as we can.
Volume: 16K Avg Volume: 19.5K.
BUY POINT: $58.05 Volume=25K Target=$68 Stop=$56.55.
POSITION: Stock (no option chain).
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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
STE (Steris–$20.28; -0.67; optionable): Medical Appliances.
STATUS: Cup w/handle. We are calling this one a cup with handle though it is somewhat skewed by the late July selling. It too suffered from the July selling, but was already near the low of its 3-month pattern. It rallied sharply off the low and cleared the 200 day MVA (20.05) and is now testing that move on very low volume. Friday it tested the 10 day MVA on the low (19.73) and then recovered. Volume was very low in the handle the last three sessions as it should be. Accumulation in this base is excellent at 4 accumulation weeks (rising volume on gains) to just 1 distribution week (lower close on rising volume). Waiting for a strong volume breakout.
Volume: 271.6K Avg Volume: 413.909K.
BUY POINT: $21.16 Volume=385K Target=$25 Stop=$19.68.
POSITION: STE LW – Dec. $17.50c (89 delta, low OI) and/or 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
ACE – Ace Ltd. is currently trading at $31.1. The September $30 Calls (ACEIF) are trading at $3.20. That provides a return of about 8% if ACE is above $30 on expiration Friday in September.
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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
Mobile Services Group Inc., which sells portable storage containers, trailers and portable office units, withdrew on Friday a $144 million initial public offering of common stock because of market conditions.
La Crescenta, California-based Mobile was hoping to use the money to repay debt, to redeem preferred stock and for general corporate purposes, including acquisitions. It had also applied for a Nasdaq listing under the symbol “MSGI” (MSGI.O).
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.
