Weekend Newsletter for February 2, 2003
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/020203.htm
1) MARKET SUMMARY
AMAT almost upends the apple cart, but indexes don’t breakdown again.
– DJ30, SP500 roll over before reaching resistance.
– GDP anemic, jobless claims stagnant.
– Nasdaq stalls at the 10 day MVA and leads the rest of the market lower.
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.
LCI (Lannett Co.–$20.52; +0.82; no options): Drug manufacturing. Splits 3:2 on 2-24-03
STATUS: Cup w/handle. It is really nice to see a pre-split in a nice pattern as well. LCI is in an 8-week cup with handle, forming the handle last week as it tested the 18 day MVA on the low. Friday there was a strong volume surge to above average levels as LCI started its move. It hit 21.44 on the high but then fell back. Accumulation is outstanding at 4 up weeks on rising volume to 0 down weeks on rising volume. Looks very solid for the breakout.
Volume: 134.1K Avg Volume: 97.863K
BUY POINT: $20.75 Volume=115K Target=$24.65 Stop=$19.35
POSITION: – Stock (no options).
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http://www.investmenthouse.com/1stocksplits1.htm
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3) Technical Play
BBY (Best Buy–$26.09; +0.17; optionable): Consumer electronics
STATUS: 50 day MVA bounce. BBY is coming off the lows of its base in a series of sharp bounces that are followed by pullbacks to its 50 day MVA (25.48). Friday BBY was back down at the 50 day MVA and started a slight move up on the session. It looks ready for the next move and this can give us a great trade up toward the 200 day MVA at 30.25. We are looking primarily at options on this play given the proximity of the target.
Volume: 2.599M Avg Volume: 5.067M
BUY POINT: $26.55 Volume=4M Target=$30 Stop=$24.69
POSITION: BBY CE – Mar. $25c (76 delta) or BBY FE – June $25c (71 delta).
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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
CBE – Cooper Industries, Inc. is currently trading at $35.43. The March $35 Calls (CBECG) are trading at $2.05. That provides a return of about 5% if CBE is above $35 on expiration Friday in March.
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Learn more about our Covered Calls Service!
http://www.investmenthouse.com/1coveredcalls1.htm
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5) IPOs
WaterU.K. bookstore chain Waterstone’s is once again the subject of bid speculation, although its parent, HMV Group plc, insists the business is not for sale.
Tim Waterstone, the founder of Waterstone’s, has been linked to various attempts to acquire the store that bears his name. In the last few days he wrote to an independent director on the board of HMV Group requesting talks about the sale of Waterstone’s, a source said.
This IPO column is continued at:
http://www.investmenthouse.com/1ipo.htm
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BOOK STORE SPECIAL OFFERS!
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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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