Weekend Newsletter for January 26, 2003
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/012603.htm
1) MARKET SUMMARY
Material breach, Iraqi preparations for chemical warfare reverse Thursday’s short covering.
– Did not take much to scare the market back down.
– Lawmakers slowly coming around to the idea of business tax credits.
– Dow, SP500 dive out of trading ranges as indexes prepare early for war.
– 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).
For post-splits, we can play them as we would pre-splits (very short term), but we prefer to stretch our horizons, playing the trend. When playing options, we look further out, 2 or more months at least. We let the trend carry us along if there is one, but we will also take profits if the technical pattern degenerates, e.g., breaks a trendline. The main difference between post-splits and pre-splits plays is that we really have to like the pattern. Pre-splits can run right before their splits even with poor technical indicators. For post-splits, we are looking at the stocks from more of a longer term “would I buy this stock at this juncture?” position. Now there are times when a hot stock splits and investors pile in to get in while the stock is ‘cheaper.’ We play those, but with more of a short-term, pre-splits mentality in that we will be ready to get out fast if the momentum fades.
Remember, everything we do has to pass muster with the market that day … don’t fight the market on these plays. Here’s a post-split play to watch and our current analysis.
DRL (Doral Financial–$28.57; -0.17; optionable): Mortgage investment
STATUS: Cup w/handle. Testing lower in the handle of the 5-month base on very low volume. Accumulation is positive and relative strength is breaking out. Waiting for the breakout.
Volume: 190.1K Avg Volume: 284.59K
BUY POINT: $30.41 Volume=446K Target=$36.52 Stop=$28.28
POSITION: DRL EE – May $25c (84 delta) and/or Stock.
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Learn more about our Stock Split Report – Forbes.com Best of the Web Online Edition says: “. . . seek out the Stock Split Report . . .”
http://www.investmenthouse.com/1stocksplits1.htm
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3) Technical Play
NFLX (Netflix–$12.33; +0.14; optionable): Mail order movie rental
STATUS: Ascending wedge. A new issue last May, NFLX is working up off the bottom of its first base, forming the current ascending wedge/triangle over the past 5 weeks as it does. Accumulation in the larger base is solid at 7 up weeks on rising volume to 2 down weeks on rising volume.and money flow is strong and rising up ahead of the stock price. Indeed, money flow is showing a positive divergence, meaning that money flow is higher at this price than it was when the stock was at 14 in June.
Volume: 453.958K Avg Volume: 335.59K
BUY POINT: $13.05 Volume=503K Target=$15.88 Stop=$12.14
POSITION: QNQ FV – June $12.50c (58 delta) and/or Stock.
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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
FDC – First Data Corp. is currently trading at $35.7. The March $35 Calls (FDCCG) are trading at $2.50. That provides a return of about 5% if FDC 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
Magna International Inc. , one of the world’s biggest auto-parts makers, plans to spin off two units later this year, but industry analysts said on Thursday it might find the companies a hard sell.
Frank Stronach, Magna’s flamboyant chairman and founder, said earlier this week that his Aurora, Ontario-based company is ready to launch its Magna Styr vehicle assembly division in some kind of spinoff “in a few months” and its recently acquired Donnelly mirrors group within a year.
This IPO column is continued at:
http://www.investmenthouse.com/1ipo.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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