Weekend Newsletter for July 20, 2003
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/071303.htm
1) MARKET SUMMARY
Microsoft helps spark a low volume bounce off of support.
– Modest reflex bounce keeps indexes in trading range.
– Preliminary sentiment still upbeat but below expectations, tech companies pushing hard to close the quarter positive.
– Selling eases off but the leading tech and small caps continue to trail.
– 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.
SBUX (Starbucks–$26.64; +0.31; optionable): Coffee shops
STATUS: Testing the breakout. The 3 week pullback from the early July breakout has formed a handle on a 10 week cup base. Very nice pullback on lower volume, holding the 18 day MVA on the Friday low (26.10) and rebounding sharply to the close. Solid accumulation and money flow on this very orderly test. We look for a strong jump back up on volume to enter new positions.
Volume: 2.992M Avg Volume: 4.328M
BUY POINT: New: $27.62 (orig. $26.30) Volume=6M Target=$30.94 Stop=$25.85
POSITION: SQX JE – Oct. $25c (58 delta) &/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
IMN (Imation–$39.39; +0.26; optionable): Storage media, etc.
STATUS: Cup w/handle. IMN made us a lot of money in 2002 with its strong run, but as with all strong moves, there has to be a new consolidation and base at some point. Well, IMN looks to be in the last stages of a 7.5 month base, pulling back the past two weeks on lower, below average volume to test the 18 day MVA (39.04). Accumulation in the base is simply outstanding at 12 up weeks on rising volume to 3 down weeks on rising volume. In short, there is a lot of ongoing buying of IMN during this base, and on a breakout it has a lot of support to move sharply higher.
Volume: 190.8K Avg Volume: 419.813K
BUY POINT: $41.12 Volume=630K Target=$50 Stop=$39.88
POSITION: IMN JH – Oct. $40c (50 delta) &/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
MIK – Michaels Stores, Inc. is currently trading at $37.89. The August $37.5 Calls (MIKHU) are trading at $1.85. That provides a return of about 4% if MIK is above $37.5 on expiration Friday in August.
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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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