Weekend Newsletter for December 9, 2001
http://www.investmenthouse.com/weekend/120901.htm “> click here or on link for full report with graphs on our website
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1) MARKET SUMMARY
Some profit taking on the employment news.
– Employment numbers give a reason to take some profits after a strong week.
– Lower volume selling as most stocks test their recent moves in orderly fashion.
– Fed is ready to do its part again, but is Congress going to do its job?
– Subscriber Questions.
– Team Trades.
http://www.investmenthouse.com/1weekendmarketsummary.htm “> Click here or on link for our full Weekend Market Summary
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http://www.investmenthouse.com/1daily1.htm “> Try “The Daily” with no risk for 2 weeks!
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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.
FMBI (First Midwest Bancorp–$34.97; +0.46; no options): Splits 5:4 effective 12-17-01.
STATUS: From August through November formed a ‘flying w’ with handle, failing at 35 three times. It has come back to test the 50 day MVA (33.65) in mid-November and early December, and has made a move up to challenge the pattern highs again. Volume has not been spectacular, coming in at 74,100 (average 93,600) as it moved up to hit a high of 35.08. Looking for a stronger move to take it on a breakout, and we are looking at the intraday high of 35.50 from early October. Target: 40.
PLAY: Aggressive: 35.20 on volume of 125,000. Stop: 33. Breakout: 35.62 on volume of 150,000. Stop: 33.50. Stock only.
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3) Technical Play
POWI (Power Integrations–$25.85; -0.40; optionable): Semiconductor.
STATUS: POWI is in a long saucer base at the bottom of a larger 23-month base, off the December 2000 lows and currently, the most recent high in November (28.48). The pullback off that high on overall lower volume could be called a handle to the 17-month saucer, the bottom from which (at the 50 day MVA) POWI ran back up last week on strong volume. Unable to break out at that point, the stock pulled back on very low volume the last 2 days of the week, and showed a doji Friday. We like the more orderly pullback and bounce back up from support (October highs) and look for a breakout. Huge money flow, good buying. Target: 35
BUY POINT: Aggressive: 26.30 on rising volume in a rally. Breakout: 28.61 on volume of 758,000 (Friday’s volume was 190,200; avg. 505,000). Stop: 26.61 (7%).
POSITION: Stock and/or January $22.50 calls to buy (QPW AX).
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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
CTX – Centex Corp. is currently trading at $50.04. The January $50 Calls (CTXAJ) are trading at $3.40. That provides a return of about 7% if CTX is above $50 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
Lawson Software (LWSN.O) on Friday said it was making an initial public offering of 14 million shares at $14 per share.
The company, which makes software for the health-care, financial services, professional services, retail and other industries, said the stock will trade on Nasdaq under the symbol “LWSN.”
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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.
