Weekend Newsletter for December 28, 2003
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/122803.htm
1) MARKET SUMMARY
Friday it was the small caps’ turn.
– Small caps lead to close out positive week, but sellers entered late Friday.
– Retail season seen as disappointment, but not for lack of consumers.
– Large cap indexes extended as NASDAQ continues its consolidation.
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).
For post-splits, we can play them as we would pre-splits (very short term), but we prefer to stretch our horizons, playing the trend. When playing options, we look further out, 2 or more months at least. We let the trend carry us along if there is one, but we will also take profits if the technical pattern degenerates, e.g., breaks a trendline. The main difference between post-splits and pre-splits plays is that we really have to like the pattern. Pre-splits can run right before their splits even with poor technical indicators. For post-splits, we are looking at the stocks from more of a longer term “would I buy this stock at this juncture?” position. Now there are times when a hot stock splits and investors pile in to get in while the stock is ‘cheaper.’ We play those, but with more of a short-term, pre-splits mentality in that we will be ready to get out fast if the momentum fades.
Remember, everything we do has to pass muster with the market that day … don’t fight the market on these plays. Here’s a post-split play to watch and our current analysis.
MMSI (Merit Medical Systems–$21.50): Medical instruments.
Testing the 50 day MVA. Broke out in early July and ran up to 24 to end November in a great breakout and run. It has now made its test of the 50 day MVA (20.61), coming back on mostly lower volume to test that level this month. It has shown some good volume around that level, popping up off the 50 day on some rising though still below average volume trade Friday. A recent split play, and a nice place to move in at the 50 day as it tests that level and finds support. A buy over 22 on volume of 260K or better.
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Learn more about our Stock Split Report – Forbes.com Best of the Web Online Edition says: “. . . seek out the Stock Split Report . . .”
http://www.investmenthouse.com/1stocksplits1.htm
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3) Technical Play
CYH (Community Health Systems; $26.72): Double bottom.
Making a short 5 week double bottom over the 50 day MVA (25.48), a good test of the breakout from a flat base in late October. It has come back to test the 18 day MVA (26.50) on very low trade after moving up to test the recent highs in the pattern. Solid 2 to 0 accumulation in the short base with strong money flow moving up ahead of the price. A buy over 27.55 on 725K or better.
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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
BBY – Best Buy Co. Inc. is currently trading at $50.56. The February $50 Calls (BBYBJ) are trading at $3.20. That provides a return of about 6% if BBY is above $50 on expiration Friday in February.
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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.
Copyright 1997 – 2003 by Online Investment Services, LP. – All Rights Reserved.
