Weekend Newsletter for December 7, 2003
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/120703.htm
1) MARKET SUMMARY
Late Thursday rally fizzles in face of less than expected economic improvement.
– Market sags again on Intel, jobs news, but no downside rout.
– Jobs report shows gains, but less than expected as Bush cross-policies hamstring recovery.
– Preparing to bounce, but day to day volatility last week is a problem.
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.
AMHC (American Healthways–$48.16; +0.1; optionable): Specialized health services. Splits 2:1 on 12-22-03.
STATUS: Testing the breakout. AMHC broke out of a 9 week base in late November, rallying to 52.33 on the Tuesday high. It spent the last part of the week easing back to test the breakout, holding the 10 day MVA (46.87) on the low and then rebounding to close, showing a tight doji. After a pullback from a rally and breakout, this often signals a rebound coming. We will look for AMHC to rally on stronger, above average volume to enter the play.
Volume: 184.02K Avg Volume: 322.363K
BUY POINT: $49.05 Volume=450K Target=$56 Stop=$46.72
POSITION: QMH BJ – Feb. $50c (48 delta) &/or Stock.
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3) Technical Play
IMOS (Chipmos Technologies–$8.21; +0.76; no options): Chip equipment
STATUS: Testing the breakout. IMOS broke out of a long 21 month base in October, kicking off the rally to 8. After that initial surge it has moved laterally the past four weeks, building a nice lateral pattern showing 2 to 0 accumulaiton. Investors are using this nice lateral move as another point to build some positions. Friday it was up on strong volume, nearing the next breakout point. Ready to step in as it continues the move this week.
Volume: 941.974K Avg Volume: 368.272K
BUY POINT: $8.38 Volume=552K Target=$10.28 Stop=$7.52
POSITION: – Stock (no option chain).
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http://www.investmenthouse.com/1tech1.htm
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4) Covered Call Play
FRED – Fred’s, Inc. is currently trading at $30.37. The January $30 Calls (FMUAF) are trading at $1.85. That provides a return of about 5% if FRED is above $30 on expiration Friday in January.
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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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