Weekend Newsletter for June 27, 2004
Investmenthouse Newsletter
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Weekend Newsletter for June 27, 2004
Table Of Contents 1) MARKET SUMMARY 2) PRE-SPLIT PLAY 3) TECHNICAL PLAY 4) COVERED CALL PLAY
Stock Split Notices Investing Q & As Glossary
1) MARKET SUMMARY
Stocks hold gains ahead of important week.
– Indexes closed mixed, poised for next week.
– GDP pulled lower by surging imports, Michigan sentiment rises.
– Fed ready to raise rates, but cautious of Japan lesson.
– Good finish to a solid week as semiconductors come to life.
– Big week, market ready to run ahead of the actual news.
– Subscriber Questions.
Read Full Weekend SummaryLearn more about our Daily Newsletter with Stock Picks! – Issued 5 Times Per Week
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.
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Chart by StockCharts.com
TEVA (Teva Pharmaceutical–$67.40; +0.06; optionable): Drugs. Splits 2 for 1 on 7-1-04.
Company Profile
STATUS: Test breakout. After the breakout from a 14 week base two weeks back, TEVA has come right back to test that move, holding the 18 day EMA (67.11) on the test, a good near term support level for a breakout. Now this one splits this week, and with the 18 day EMA and the proximity of the split, it is primed to make a move.
Volume: 1.465M Avg Volume: 2.415M
BUY POINT: $68.35 Volume=2.8M Target=$74 Stop=$66.85
POSITION: TVQ IM – Sept. $65c (67 delta).
Learn more about our Stock Split Report – Issued 5 Times Per Week
Chart by StockCharts.com
3) Technical Play
DAB (Dave & Busters–$18.44; +0.23; optionable): Restaurants and games.
Company Profile
STATUS: Ascending triangle. Making some higher lows above the 50 day EMA (17.61) below a constant top just below 19. This is an 11 week base with excellent 4 to 1 accumulation (4 up price weeks on rising volume to 1 down price week on rising volume) shows money has continued to move into the stock during this base. These bases build pressure from below and the breakouts can be explosive. Strong money flow to go along with the accumulation, and the use of the 50 day EMA as support shows big money ready to buy into it at that level. Volume was solid Wednesday as the stock jumped off the 50 day EMA. It eased laterally to end the week, but it looks ready for a breakout move.
Volume: 68.6K Avg Volume: 90.318K
BUY POINT: $18.98 Volume=135K Target=$22.75 Stop=$17.88
POSITION: DAB KW – Nov. $17.50c (71 delta) &/or Stock.
Learn more about our Technical Traders Report – Issued 5 Times Per Week Chart by StockCharts.com
4) Covered Call Play
MCHP – Microchip Technology, Inc. is currently trading at $30.7 The August $30 Calls (QMTHF) are trading at $2.35. That provides a return of about 6% if MCHP is above $30 on expiration Friday in August.
Company Profile
Learn more about our Covered Call Tables – 8 Tables Updated 5 Times Per Week
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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 asscociated herewith receives compensation in any manner from any of the companies that are discussed in this newsletter or on the related websites.
