Weekend Newsletter for June 22, 2003
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/062203.htm
1) MARKET SUMMARY
Anticlimactic end to the week.
– A very quiet expiration Friday as the market ends in a dead heat.
– Waiting on the FOMC interest rate decision.
– Market is in a state of transition, but has not tipped its hand.
– 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.
CMTL (Comtech Telecom–$28.09; -0.34; no options): Telecom equipment. Splits 3:2 on 7-15-03.
STATUS: Testing the 10 day MVA. After a strong move higher up the 10 day MVA (26.90), CMTL surged to 30 and is now testing back on that move. Volume is coming back on lower though still above average trade. Money flow is excellent, and we are looking at this as a momentum play. We want to see more volume a move back up off of the doji over the 10 day to start taking positions.
Volume: 318.8K Avg Volume: 85K
BUY POINT: $28.45 Volume=350K Target=$32.72 Stop=$26.46
POSITION: – Stock (no option chain).
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3) Technical Play
DNY (R.R. Donnelley–$25.25; +0.13; optionable): Business management.
STATUS: Flying plateau. DNY broke out of a 5 month cup with handle base in late May, rallied to 25, and has since moved laterally over the 10 day MVA (25) on lower, below average volume. Accumulation in the base was positive at 5 to 3 (5 up weeks on rising volume to 3 down weeks on rising volume) and money flow is excellent. Volume started to run higher Friday, showing signs of life that can often indicate a breakout is ahead. With the 10 day MVA moving up to meet it, it looks as if this lateral pattern is ready to start the next move higher.
Volume: 558.1K Avg Volume: 617.272K
BUY POINT: $25.55 Volume=926K Target=$30 Stop=$24.45
POSITION: DNY IE – Sept. $25c (56 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
BVF – Biovail Corp. Intl. is currently trading at $45.09. The July $45 Calls (BVFGI) are trading at $3.60. That provides a return of about 8% if BVF is above $45 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.
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