Weekend Newsletter for February 8, 2004
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/020804.htm
1) MARKET SUMMARY
Jobs fail to scare investors, fuel a low volume surge.
– Market surges on ‘just right’ jobs report.
– Payroll jobs improve but again less than expected while household survey shows continued gains.
– Upside volume has disappeared.
– Subscriber Questions.
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.
NYB (New York Community Bancorp–$41.96; +1.46; optionable): Savings & loan. Splits 4:3 on 2-18-04
STATUS: Testing the breakout. NYB broke from a short 6 week cup base in mid January, its second base on this strong run since the March break higher. It has worked in a choppy pattern the past two weeks, holding the 18 day MVA (40.43) on the lows, managing to rebound and showing generally good price/volume action. Accumulation in the base was a solid 3 to 0 (3 up price weeks on rising volume to 0 down price weeks on rising volume. Friday NYB was surging off the 18 day after a Thursday test, volume remaining strong and moving up as it did. Relative strength broke out on the move, a signal that even with the strong market rally Friday NYB is one of the better performers.
Volume: 1.636M Avg Volume: 966.073K
BUY POINT: $42.15 Volume=1.5M Target=$46.15 Stop=$40.32
POSITION: NYB DH – Apr. $40c (80 delta).
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http://www.investmenthouse.com/1stocksplits1.htm
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3) Technical Play
OPLK (Oplink Communications–$2.87; +0.36; no options): Semiconductor integrated circuits
STATUS: Reverse head and shoulders. Really nice 17 week base sporting strong 6 to 3 accumulation. It rallied up to 3.25 in mid-January to form but has failed and fallen back to the 50 day MVA (2.56) to form the right shoulder. It held and started to bounce Friday on stronger, above average volume. With money flow surging up ahead of price it looks as if OPLK is ready to make its breakout run.
Volume: 1.695M Avg Volume: 1.276M
BUY POINT: $3.03 Volume=1.2M Target=$3.98 Stop=$2.82
POSITION: – Stock (no option chain).
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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
MCHP – Microchip Technology, Inc. is currently trading at $30.16. The March $30 Calls (QMTCF) are trading at $1.90. That provides a return of about 6% if MCHP is above $30 on expiration Friday in March.
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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.
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