Weekend Newsletter for June 15, 2003
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/061503.htm
1) MARKET SUMMARY
Fragile market found a reason to sell.
– Market gets slapped by a 200-person survey, and this time no late rebound.
– Producer prices slide along with Michigan sentiment.
– Another down Friday on mixed volume, but no breakdown yet.
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.
FRED (Freds Inc.–$36.26; -0.73; optionable): Discount variety stores. Splits 3:2 on 7-2-03.
STATUS: Testing the breakout. FRED is hanging in there, holding the tight, lateral breakout consolidation on very low, below average volume. Got a bit wilder Friday in the selling, but did not breach the bottom of the lateral move (36). Still solid money flow and we will just wait for the break higher.
Volume: 127.781K Avg Volume: 262.344K
BUY POINT: $37.68 Volume=414K Target=$42.75 Stop=$34.75
POSITION: FMU HG – Aug. $35c (65 delta) &/or Stock.
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3) Technical Play
OVRL (Overland Storage–$19.11; +0.11; optionable): PC data storage.
STATUS: Cup w/handle. Big volume to end the week and OVRL is on the verge of what looks to be a big breakout for a short 7-week base. This base has formed right on top of a much larger double bottom with handle base that covered most of 2002 and the first part of this year. A leader in the market, we are looking for a big volume breakout with a lot of eagerness.
Volume: 366.37K Avg Volume: 126.128K
BUY POINT: Clear resistance: 19.62; Aggressive: $19.22 Volume=125K Target=$22.85
Stop=$17.78
POSITION: QOJ HW – Aug. $17.50c (57 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
DRIV – Digital River, Inc. is currently trading at $18.02. The July $17.5 Calls (DQIGW) are trading at $1.80. That provides a return of about 8% if DRIV is above $17.5 on expiration Friday in July.
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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.
Copyright 1997 – 2003 by Online Investment Services, LP. – All Rights Reserved.
