Weekend Newsletter for March 3, 2002
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http://investmenthouse.com/weekend/030202.htm “> Read this report online in full color with graphs
1) MARKET SUMMARY
Entire market finally responds to upbeat economic news.
– Good economic news finally has a lasting effect.
– S&P joins Dow in a follow through and breakout.
– Nasdaq still cannot muster true strength.
– The economic numbers that caused the surge: manufacturing recession over?
– 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.
GILD ($73.75; +3.29): Splits 2:1 effective March 8.
STATUS: Great move! After pulling back from intraday highs the last two sessions, GILD held over its long-term down trendline, and Friday tested down to 68.36 (18 day MVA at 68.07) before springing back up over our buy point (72) with a lot of punch. It closed at a new high (prior high 73.67), and we will look for a continued move up, although GILD will likely need a rest somewhere along the way to a target of 80.
PLAY: From here: Riding positions, with new (aggressive) positions on a move over 74.25. Stop: 69.50. If we get a test of 72 early in the week, we can look at positions on a last pre-split run from there. Stock and/or April $65 calls to buy (GDQ EM).
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http://www.investmenthouse.com/1stocksplits1.htm “> Click here to learn more about our Stock Split Report – Forbes.com Best of the Web Online Edition says: “. . . seek out the Stock Split Report . . .”
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3) Technical Play
COHU (Cohu Inc–$24.67; +1.63; optionable):
STATUS: COHU roared out of a 7.5-month base in late February (the stock formed a reverse head and shoulders-type pattern August through December within the larger base) after correcting back below all its moving averages. The breakout move was launched from the 200 day and 50 day MVAs, taking COHU to the February highs near 25. After testing the breakout on a pullback to the 10 day MVA (23.09), it lunged back up in a high volume move off of the support. Looking for the stock to continue the move; after the rally Friday we may get a test of the 24 level before COHU resumes the breakout. A strong move, however, and may keep blasting up if the market cooperates (volume 367,900; avg. 98,200). Strong money flow, high relative strength. Target: 30
BUY POINT: 24.80 on continued strong volume. Stop advisory (7%): 23.06
POSITION: Stock and/or May $22.50 calls to buy (QCH EX; 63 open interests).
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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
EP – El Paso Corp. is currently trading at $40.15. The April $40 Calls (EPDH) are trading at $2.40. That provides a return of about 6% if EP is above $40 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
Shares in financial institution Home Building Society Ltd traded at more than three times their offer price on Friday following a strong Australian stockmarket debut.
However, the general public missed out on the offer of 12 million shares at A$1.00 per share.
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.
Copyright 1997 – 2002 by Online Investment Services, LP. – All Rights Reserved.
