Weekend Newsletter for March 21, 2004
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/032104.htm
1) MARKET SUMMARY
Last hour drop sets up an interesting week.
– ‘Normal’ expiration turns ugly late.
– PPI revisited: manufacturers forced to stock up on raw materials as prices rise, availability falls.
– Semiconductors tank, putting the market at risk of a deeper test.
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.
DWCH (Datawatch–$10.37; -0.1; no options): Business software. Splits 2:1 on 4-9-04
STATUS: Breakout test. Continues the low, below average volume lateral move over the 18 day MVA (9.55) move after exploding higher out of a 6 month flat base. Holding up very well in a flat, lateral test as the market sells. Have to be patient with these and let them make the break higher on a solid jump in trade.
Volume: 18.453K Avg Volume: 120.766K
BUY POINT: $10.92 Volume=175K Target=$13.15 Stop=$10.16
POSITION: – Stock (no option chain).
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http://www.investmenthouse.com/1stocksplits1.htm
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3) Technical Play
GTI (Graftech Intl.–$14.22; +0.19; optionable): Graphite & carbon-base products for energy industry.
STATUS: Ascending triangle. A nice 10 week base moving up the 50 day MVA (13.01) on the lows and below a constant top at 14.50. Accumulation in the base is an excellent 4 to 0 (4 up price weeks on rising volume to 0 down price weeks on rising volume.) Money flow is moving up sharply ahead of price and relative strength is breaking out. Friday the stock tried the breakout move, rallying to 15 intraday but then falling back for a modest gain on the close. Like these bases as they build pressure from below and often provide very explosive breakouts. Looking for it to follow the strong money flow and breakout and hold the move on the continued strong trade we have seen the past three sessions.
Volume: 1.661M Avg Volume: 1.116M
BUY POINT: $14.65 Volume=1.8M Target=$17.62 Stop=$13.62
POSITION: GTI FC – June $15c (45 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
ULBI – Ultralife Batteries, Inc. is currently trading at $20.09. The April $20 Calls (BMQDD) are trading at $1.55. That provides a return of about 8% if ULBI is above $20 on expiration Friday in April.
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Learn more about our Covered Calls Service!
http://www.investmenthouse.com/1coveredcalls1.htm
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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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