Weekend Newsletter for January 25, 2004
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/012504.htm
1) MARKET SUMMARY
Stocks struggle again, but the leading sectors emerge once more.
– Lukewarm enthusiasm over tech earnings wears off, but buyers return late, cut losses.
– Interesting economic statistics: we have been here before, and not only did we survive, we prospered.
– SP500 tests resistance and drops, NASDAQ tests 10 day MVA and rebounds.
– 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.
ANPI (Angiotech Pharmaceutical–$50.72; -0.21; optionable): Drugs. Splits 2:1 on a date to be announced.
STATUS: Double bottom. A nice volume move Thursday sent ANPI close to the breakout but then took a breather Friday on very low, below average volume. It is still solid in the 18 week base that used the 50 day MVA (46.91) as the floor. The base has solid accumulation at 5 to 2 (5 up price weeks on rising volume to 2 down price weeks on rising volume), another indication of big money moving into the stock over the period of the base. Money flow continues to move higher and again, we are looking for ANPI to follow it.
Volume: 213.685K Avg Volume: 365.539K
BUY POINT: $51.32 Volume=528K Target=$59 Stop=$47.68
POSITION: AUJ FJ – June $50c (58 delta) &/or Stock.
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3) Technical Play
PROX (Proxim–$2.52; +0.22; no options): Telecom equipment
STATUS: Double bottom. PROX is moving in a big, 8 month base that formed over the key support at the 200 day MVA (1.51). Volume has surged this month as PROX pushes at the breakout point at 2.50. Friday volume surged as PROX tried the breakout on a huge volume spike, rallying to 2.65 on the high before fading back to that resistance at 2.50. Super money flow and excellent 10 to 1 accumulation in the right side of the base formed the past 5 months. With the surging volume and excellent money flow, it looks ready to make the breakout move.
Volume: 9.435M Avg Volume: 2.543M
BUY POINT: $2.64 Volume=3.5M Target=$3.48 Stop=$2.42
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 $30.47. The March $30 Calls (QMTCF) are trading at $2.15. That provides a return of about 6% if MCHP is above $30 on expiration Friday in March.
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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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