Weekend Newsletter for March 24, 2002
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http://investmenthouse.com/weekend/032402.htm “> Read this report online in full color with graphs
1) MARKET SUMMARY
Friday fails to capitalize.
– Thursday’s reversal finds no follow through as market caps a consolidation week.
– Consolidation week pure and simple.
– Leading stocks still in very solid patterns.
– ECRI finished economic news on a strong note.
– Team Trades.
http://www.investmenthouse.com/1weekendmarketsummary.htm “> Click here or on link for our full Weekend Market Summary
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2) Stock Splits
Be sure to read our Stock Splits Manual. 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.
MKC (McCormick & Co., Inc.–$50.50; +1.37; optionable): Splits 2:1 effective 4-9-02.
STATUS: Nice move! MKC had made a nice move up from 46 on its test of the 50 day MVA (currently 46.44). It had slowed down as it approached its prior high at 49.57, but after settling with a low volume doji Thursday, MKC blasted up Friday, and volume was way up again (as it had been on the recent move), at 375,900 (average 194,000). Good move, and we are adjusting the target for positions up to 56.
PLAY: Still a buy up to 51, with stock and/or June $45 calls to buy (MKC FI – no open interest for the May calls).
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3) Technical Play
SLGN (Silgan Holdings–$33.06; +0.41; no options): Packaging.
STATUS: Threw its first flag mid-February and has formed the second on a 2-week pullback to support at the 10 day MVA (18 day MVA is just below at 32.22). This second flag is not as tight as the first, but is showing the lateral movement after an early March pop off of the 10 day MVA that took SLGN to the high at 34.04. Volume is low and below average at 103,900 Friday (avg. 193,000), slightly higher with the stock making a small bounce from the 10 day. Looking for another run; last breakout for the run to the high resulted in a 6-point run in just over 2 weeks. Huge money flow and good buying. Target: 39
BUY POINT: Aggressive: 33.30 on volume of 260,000 or higher. Stop Advisory (7%): 30.97
POSITION: 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
DRI – Darden Restaurants, Inc. is currently trading at $37.66. The April $37.5 Calls (DRIDU) are trading at $1.70. That provides a return of about 4% if DRI is above $37.5 on expiration Friday in April.
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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
IPOs in the first quarter appear likely to fall behind the 17 deals priced in the same quarter of 2001. As the Nasdaq and the Dow gyrated wildly in response to Enron’s collapse and recurring concerns over corporate earnings, made the challenge of taking companies public even more difficult. With only one more deal expected to price next week, the quarter will likely close with 15 deals priced. Surprisingly, thanks to the $3.9 billion IPO from Travelers Property Casualty, IPO proceeds for the quarter so far have surpassed Q1 2001 proceeds by 28% and out raised Q4 2001 by 13%.
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.
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