Weekend Newsletter for March 28, 2004
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/032804.htm
1) MARKET SUMMARY
Uninspired but doing what it should until a late, pre-weekend sell off.
– A modest continuation rally collapses late.
– Jobs report is the focus in a big week for data even as reports improve after a breather.
– Continuation rally falters at an important point, needs to continue bounce next week.
– Pessimism showing a nice rise.
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.
UNFI (United Natural Foods–$47.63; -0.22; no options): Wholesale natural foods. Splits 2:1 on 4-20-04
STATUS: Flying plateau. UNFI broke out from a 13 week cup with handle base in early February and then rallied up the short term MVA (10 and 18 day MVA) to early March, hitting 50 on the high. In the market selling it has come back to test the move; indeed, it needed a rest after a nice breakout and run. As the market sold it came back to the 18 day MVA (46.90) and then bounced on good volume and now moving laterally over the 10 day MVA (47.40) on lower trade. It is taking a breather and setting up the next run. It may take several more sessions to completely set up, but with money flow surging ahead of price we want to be ready to move in when it makes its breakout move.
Volume: 116.869K Avg Volume: 173.59K
BUY POINT: $48.88 Volume=260K Target=$56.22 Stop=$46.78
POSITION: – Stock (no option chain).
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3) Technical Play
ODP (Office Depot–$18.15; +0.60; optionable): Office supplies
STATUS: Cup w/handle. ODP is starting the breakout Friday, surging on the strongest volume in over a month. Excellent accumulation at 10 to 4 (10 up price weeks on rising volume to 4 down price weeks on rising volume), a very good signal as it shows money was moving into the stock during its 7 month base. Looks excellent here.
Volume: 2.845M Avg Volume: 1.571M
BUY POINT: $18.32 Volume=2.4M Target=$22 Stop=$17.42
POSITION: ODP GW – July $17.50c (65 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
KOSP – Kos Pharmaceuticals, Inc. is currently trading at $40.08. The April $40 Calls (KQWDH) are trading at $2.00. That provides a return of about 5% if KOSP is above $40 on expiration Friday in April.
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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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