Weekend Newsletter for June 23, 2002
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http://investmenthouse.com/weekend/062302.htm “> Read this report online in full color with graphs
1) MARKET SUMMARY
The week closes out with no rally attempt.
– Breaking lower but will most likely bounce one more time before rolling over for the do or die time.
– Unfortunately, with the Dow’s breakdown, the Nasdaq and S&P 500 will most likely undercut the September lows by a significant margin while the Dow finally gets sold off.
– Disconnect between the financial markets and the economy: continued.
– Market approaching the critical level: it will hold or it will fall a lot further.
– Review of game plan.
http://www.investmenthouse.com/1weekendmarketsummary.htm “> 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.
COH (Coach–$55.00; +0.74; optionable): Splits 2:1 on 7-5-02
STATUS: COH was in some trouble just recently but with some good earnings results it moved back over the 50 day MVA (53.59) early last week. Friday volume kicked up sharply to above average levels as the stock moved up off the 50 day MVA. That is what you want so see: higher volume at the 50 day MVA on gains indicates that the big money is buying at that level. On a pre-split that is all we need: good earnings, test of the 50 day MVA, volume ramping up. We will look for the move higher and then get in and capture the run.
Volume: 597.9K Avg Volume: 475.363K
BUY POINT: $55.51 Volume=500K Target=$60 Stop=$51.62
POSITION: COH HJ – Aug. $50 call (74 delta) and/or stock. We prefer options on this play as we can leverage our way into bigger profits.
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3) Technical Play
MMSI (Merit Medical Systems–$18.79; +0.13; optionable): Merit Medical Systems.
STATUS: Cup w/handle. In the handle of a 10-week cup with handle base. Excellent accumulation in the base with 4 accumulation weeks to just 1 distribution week. Relative strength is already breaking out. This is relatively early in the stock’s run, and it is in a good sector.
Volume: 77.9K Avg Volume: 159.545K.
BUY POINT: $19.5 Volume=240K Target=$23.4 Stop=$18.14.
POSITION: RMQ JC – Oct. $15 call (80 delta Low OI) and/or stock.
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http://www.investmenthouse.com/1tech1.htm “> Click here to learn more about our Technical Trader Report
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4) Covered Call Play
COO – The Cooper Companies, Inc. is currently trading at $47.62. The August $45 Calls (COOHI) are trading at $4.70. That provides a return of about 5% if COO is above $35 on expiration Friday in August.
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http://www.investmenthouse.com/1coveredcalls1.htm “> Click here to learn more about our Covered Calls Service
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5) IPOs
Shares of drugmaker Merck & Co. Inc. (MRK.N) fell more than 3 percent on Friday following a published report that its pharmacy benefits manager subsidiary, Merck-Medco, inflated its revenue by recording co-payments from patients to pharmacies that Merck never actually collects.
Shares of Merck, a component of the Dow Jones Industrial Average, fell $1.80, or 3.45 percent, to $50.40 early Friday on the New York Stock Exchange — below their 52-week low of $50.78.
http://www.investmenthouse.com/1ipo.htm “> . . . continued . . .
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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 – 2002 by Online Investment Services, LP. – All Rights Reserved.
