Weekend Newsletter for December 23, 2001
http://www.investmenthouse.com/weekend/122301.htm “> click here or on link for full report with graphs on our website
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1) MARKET SUMMARY
‘Old’ reasons to buy overcame Thursday’s reasons to sell.
– A rebound on strong expiration volume, but it did not change the character for now.
– Sectors still showing good upside groups and good downside groups.
– Smaller stocks showing some good action.
– Consumer expectations rise unexpectedly.
http://www.investmenthouse.com/1weekendmarketsummary.htm “> Click here or on link for our full Weekend Market Summary
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2) Stock Splits
Be sure to read our Stock Splits Manual. 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.
XRAY (Dentsply Internat–$49.90; +0.86; optionable): Medical instruments. Splits 3:2 effective February 1.
STATUS: XRAY is a bit erratic now, but we are used to that with post splits. The stock is making some nice moves, having broken out Wednesday but pulling way back to close off of its new all-time high of 51.14. After Thursday’s gap up and reversal we were anticipating a possible drop back, but volume was low and XRAY immediately reversed, moving back up Friday on increased, strong volume of 421,900 (average 240,400). We can look at playing a continued move up, watching the high on the way toward an initial target of 54. Remember, with pre-splits we look to catch a move, ready to get out on topping signs, and wait for the set up for the next move.
PLAY: Over 50.19 on continued strong volume, with stock and/or January $45 calls to buy (XAQ AI).
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3) Technical Play
LTD (The Limited–$14.48; +0.48; optionable): Retail.
STATUS: Made a solid move up in the pennant pattern (5 weeks), actually moving over resistance at the 200 day MVA (14.69) but pulling back down below that resistance to close. The move was on sharply higher volume (2.6 million; avg. 1.9 million) and helped by an upgrade from Merrill Lynch. Our old buy point was 14.97 but since the MVA is lower, we are taking that down a few cents. Money flow strong and buying looks decent. Target: 18
BUY POINT: 14.82 on volume of 2.5 million or higher (reached Friday). Stop: 13.78 (7%)
POSITION: Stock and/or February $12.50 calls to buy (LTD BV).
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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
SKYW – Skywest Inc. is currently trading at $25.10. The January $25 Calls (UWQAE) are trading at $1.45. That provides a return of about 6% if SKYW is above $25 on expiration Friday in January.
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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
Zurich Financial Services (ZURZn.VX), Europe’s third-largest insurer, on Friday issued its fourth profit warning of the year, saying it expected a net loss for 2001 of between $200 million and $400 million.
The firm said the loss, calculated using the widely-accepted IAS accounting standards, was due to one-off insurance losses tied to the September 11 attacks in the United States and lower investment income. Higher-than-expected non-life insurance claims also depressed earnings.
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http://www.investmenthouse.com/1ipo.htm “> This story continued in our IPO Forum
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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, 1998, 1999, 2000, 2001 by Online Investment Services, LP. – All Rights Reserved.
