Weekend Newsletter for June 29, 2003
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/062903.htm
1) MARKET SUMMARY
Same action, a test of resistance and a fall to near support.
– Another test of near resistance and another fall to near support.
– Michigan sentiment improves in final report but consumer spending still weak.
– Ten year bond hits the magic number at 3.55.
– Market ready to slide to the next level of support.
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.
CNTE (Centene Corp.–$37.94; -0.1; no options): Splits 3:2 on 7-14-03
STATUS: Testing the breakout. CNTE gave us a good move up in early June but stalled out just below 40. It has made a nice, low volume test of that move, coming back to hold the 18 day MVA (37.19) on the lows last week. It is now trying to make the move off of that level, but it is going to need to get over 38 on some volume to get the move going again. Plenty of time ahead of the split, and on another strong volume surge over 38 that is holding heading into the close, we will open some more positions.
Volume: 51.7K Avg Volume: 132.109K
BUY POINT: New: $38.35 (orig. $35.05) Volume=180K Target=New positions: $44 (orig. positions: $40.45) Stop=$36.44
POSITION: – Stock (no option chain).
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3) Technical Play
ADAT (Authentidate–$3.8; +0.49; no options): Authentication software
STATUS: Cup w/handle. ADAT is in the process of breaking out of a 7 month base showing solid 7 to 5 accumulation (7 up weeks on rising volume to 5 down weeks on rising volume) and surging money flow. The handle was beautiful, forming this money on lower, below average volume just as it should. Friday ADAT shot higher on stronger though slightly below average volume. Looks strong and we just need to see volume rising on the next move.
Volume: 113.75K Avg Volume: 134.292K
BUY POINT: $3.95 Volume=201K Target=$5 Stop=$3.67
POSITION: – Stock (no option chain).
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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
WSTL – Westell Technologies, Inc. is currently trading at $8.54. The July $7.5 Calls (QLWGU) are trading at $1.50. That provides a return of about 6% if WSTL is above $7.5 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.
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