Weekend Newsletter for January 11, 2004
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/011104.htm
1) MARKET SUMMARY
Market bounces back from disappointing news but cannot hold to the close.
– Another comeback, but this one fails to hold.
– Jobs nowhere near expectations, out of sync with rest of economy.
– Market sells but volume retreats, leaders still showing strength.
– 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.
NCEN (New Century Financial–$40.41; +1.6; optionable): Mortgage investment
STATUS: Ascending triangle. After a nice breakout in October NCEN has formed the current 9 week base, working up the 50 day MVA (37.23), using that as support. It has a constant top at roughly 40, building pressure from below as it works up toward that level. Volume surged Wednesday and Friday as NCEN made strong advances toward the breakout point. Excellent 4 to 1 accumulation (4 up price weeks on rising volume to 1 down price week on rising volume) in the base. Ready to make a breakout and is flexing its muscles some this past week.
Volume: 1.558M Avg Volume: 932.772K
BUY POINT: $41.32 Volume=1.4M Target=$49 Stop=$38.43
POSITION: URE EH – May $40c (58 delta) &/or Stock.
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http://www.investmenthouse.com/1stocksplits1.htm
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3) Technical Play
AXTI (AXT, Inc.–$3.77; +0.25; no options): Semiconductor integrated circuits
STATUS: Cup. AXTI is trying the breakout from a 6 week cup base that formed right after a 12 week double bottom. These base on base patterns do a good job of weeding out the sellers. Accumulation in the current base is a strong 3 to 0 (3 up price weeks on rising volume to 0 down price weeks on rising volume). That indicates that there was overall buying of the stock as it consolidated. It also held over the 50 day MVA (2.94) as the base formed, another indication of strength in the stock. Volume surged Wednesday and Friday as AXTI moved higher, following money flow. Relative strength is breaking out as well, another sign of the stock’s strength. Looking to pick it up from here on a continued volume move.
Volume: 772.026K Avg Volume: 165.727K
BUY POINT: $3.84 Volume=525K Target=$4.85 Stop=$3.54
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
RHAT – Red Hat, Inc. is currently trading at $20.39. The February $20 Calls (RCVBD) are trading at $1.85. That provides a return of about 8% if RHAT is above $20 on expiration Friday in February.
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Learn more about our Covered Calls Service!
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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