Weekend Newsletter for December 21, 2003
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1) MARKET SUMMARY
Expiration volatility returns, but market returns to flat by the close.
– Indexes take a breather as semiconductors try to hang on at the 50 day MVA.
– Big week ahead for the consumer while business spending surges.
– Holiday rally was in force as old economy surged, techs refused to cave.
– Subscriber Questions.
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.
LEN (Lennar–$95.65; -0.2; optionable): Residential construction. Splits 2:1 on 1-21-03
STATUS: 50 day MVA test. After another breakout from its most recent base in October, LEN rallied to 100. That point is both a magnet and a barrier; stocks rush to get there and then they stall when they make it. LEN hit 100 to start the month and then fell back with the rest of the homebuilders. As with the builders, it held the 50 day MVA (90.92) and moved laterally for a week before starting the bounce up last week. Volume was strong to start the move, but then faded to end the week. Not bad action, however, as LEN cleared the 18 day MVA (94.42) Thursday and then took a breather Friday, holding over the 18 day. Looking for it to tap the 18 day again and then continue the move on some better volume.
Volume: 1.186M Avg Volume: 1.554M
BUY POINT: $96.62 Volume=1.7M Target=$106 Stop=$94.21
POSITION: LEN BS – Feb. $95c (56 delta).
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3) Technical Play
CHRD (Chordiant Software–$4.99; +0.42; no options): Technical and system software
STATUS: Ascending triangle. CHRD is making the breakout from a 10 week base sporting solid 3 to 1 accumulation (3 up price weeks on rising volume to 1 down price week on rising volume. A very nice, tight base with volume surging on the Friday breakout move along with a relative strength breakout showing the stock’s strength. CHRD is following the money flow higher, and we are ready to move in on a further gain.
Volume: 1.336M Avg Volume: 689.236K
BUY POINT: $5.08 Volume=1M Target=$6.12 Stop=$4.58
POSITION: – Stock (no option chain).
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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
SLNK – Spectralink Corp. is currently trading at $18.14. The January $17.5 Calls (SXUAW) are trading at $1.45. That provides a return of about 5% if SLNK is above $17.5 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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