Weekend Newsletter for December 14, 2003
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/121403.htm
1) MARKET SUMMARY
Late recovery is promising but little volume.
– Market limps in for a gain. Already exhausted after Thursday rally?
– Michigan straw poll misses mark as small business confidence soars.
– Nasdaq reclaimed the 50 day MVA but can it hold it with the chips struggling?
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.
JCI (Johnson Controls–$111.37; +0.45; optionable): Auto controllers. Splits 2:1 on 1-5-04
STATUS: Ascending triangle. JCI has rallied well off of the March low and is coming off of its fourth 50 day MVA (106.75) test. It is getting late in the run, but it is also tightening up just over the 18 day MVA (109.37) in a narrow range on below average volume. This type of pattern can yield a strong breakout to the upside and a quick run. They can also fizzle quickly. Thus we are looking for a solid volume increase on a move over the recent highs as our entry point for a quick play. The stock can make a 6 point run in a couple of sessions, and once it gets going that is what we are looking for. Looking at using options to leverage our return.
Volume: 299.1K Avg Volume: 433.545K
BUY POINT: $112.25 Volume=550K Target=$118.45 Stop=$110.02
POSITION: JCI DB – Apr. $110c (61 delta).
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3) Technical Play
MICU (Vicuron Pharma–$18.73; +0.78; no options): Drugs
STATUS: Flat base. MICU is working in a 10 week base that has held over the 50 day MVA (17.68) on its lows. That is a very good sign as it shows the big money is moving in here to accumulate the stock. That is evident in the accumulation, a strong 4 to 0 (4 up weeks on rising volume to 0 down weeks on rising volume. Strong money flow is helping lead the way higher as volume surged the last two sessions of the week and MICU ran toward a breakout from the top of the range (range runs from 17 to 19). Want to see that volume continue as MICU makes the breakout move.
Volume: 675.5K Avg Volume: 325K
BUY POINT: $19.12 Volume=488K Target=$22.95 Stop=$17.98
POSITION: – Stock (no option chain).
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4) Covered Call Play
CECO – Career Education Corp. is currently trading at $40.27. The January $40 Calls (CUYAH) are trading at $2.90. That provides a return of about 7% if CECO is above $40 on expiration Friday in January.
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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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