Weekend Newsletter for July 27, 2003
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1) MARKET SUMMARY
Late rally keeps the consolidation just that.
– A test of support sparks a late wave of buying.
– Durables orders solid on all fronts.
– Market keeps on doing what is best for it regardless of what the pros think.
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.
JBHT (JB Hunt Transportation–$46.83; +0.2; optionable): Trucking. Splits 2:1 on 9-2-03
STATUS: Flying plateau. JBHT announced solid earnings and a split July 17, gapped higher and rallied up to 47.50. It has since moved laterally in a tight range, holding the breakout and moving on low volume. Excellent accumulation and money flow support the stock as it moves laterally to consolidate the gains. Just going to let it complete the lateral move and then explode higher on the next leg.
Volume: 360.334K Avg Volume: 668.435K
BUY POINT: $47.74 Volume=750K Target=$54.94 Stop=$44.65
POSITION: JHQ II – Sept. $45c (65 delta) &/or Stock.
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3) Technical Play
MTMD (Microteck Medical–$3.63; +0.53; no options): Medial appliances
STATUS: Breakout. No news, just a breakout because investors want the stock. After a nice and tight 7 month flat base showing excellent 9 to 3 accumulation MTMD exploded higher in early July. It moved laterally again for two weeks and shot higher once more Friday on a strong volume surge. Looking to get on board on a quick test of 3.35ish early this week. After a strong surge a stock will often open a bit lower the next session as the market maker tries to get some more stock; he opens it lower to get some profit takers. Once he gets some takers he has what he needs and it is free to resume the move. Thus we can pick it off on some early weakness and then watch it rally back up. It could always race higher from here, and if it does we will take a partial position and then let it come back to make the test and then pick up the rest of the position.
Volume: 1.565M Avg Volume: 143.871K
BUY POINT: $3.48 Volume=216K Target=$4.48 Stop=$3.24
POSITION: – Stock (no option chain).
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4) Covered Call Play
PLMD – Polymedica Corp. is currently trading at $36.05. The September $35 Calls (PMIG) are trading at $2.80. That provides a return of about 5% if PLMD is above $35 on expiration Friday in September.
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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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