Weekend Newsletter for March 6, 2005
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Weekend Newsletter for
March 6, 2005
Table Of Contents 1) MARKET SUMMARY 2) PRE-SPLIT PLAY 3) TECHNICAL PLAY 4) COVERED CALL PLAY
http://ichart.yahoo.com/v?s=^ixic”> http://ichart.yahoo.com/v?s=^dji”>
http://www.investmenthouse.com/1splitnotification.htm”>Stock Split Notices http://www.investmenthouse.com/1questions.htm”>Investing Q & As http://www.investmenthouse.com/1glossary.htm”>Glossary
1) MARKET SUMMARY > >From “The Daily” at InvestmentHouse.com
NYSE stocks breakout with boost from jobs report.
– Jobs report helps propel a modest follow through on SP500, DJ30, SP600.
– ‘Just right’ jobs data has economists crowing about low inflation.
– Factory orders rise unexpectedly as business spending remains strong.
– ECRI indicating stronger economy, but rising inflation.
– NASDAQ lags, but it is building its base, cleaning up behind the breakouts.
– Market defying oil prices and Fed rate hikes, maintains 2004 base and breakout.
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Despite oil prices hitting $55/bbl, the Fed still clearly on a rate hiking campaign and long end interest rates finally on the rise, stocks found reason to rally last week. For the second week it was a slow start and then a nice price recovery. It was no rip roaring rebound, but a steady rise once again in the face of spiking oil prices and gasoline prices set to jump about $0.25/gallon over the next couple of weeks. Yes energy got a bit speculative last week as gasoline futures hit a record high even as gasoline inventories hit record highs. Still stocks sucked it up and kept going up.
Friday’s gains broke SP500 to a new post-2001 high, same with DJ30. SP600 and SP400 (small and mid-caps) moved to new all-time highs once more with the small caps leading the entire market. They look pretty darn good for a sector that was supposed to be on the skids by now as the recovery transitioned from, well, a recovery, to a sustained expansion. The large caps were going to take over and deliver the gains in the future. Sound familiar? This was the same thing many analysts were saying in January of 2004 after a strong stock rally and GDP surges in 2003. Friday we were hearing the same thing from more analysts even as the small caps broke to another all-time high, finally able to coax the reluctant large caps to a breakout as well.
The catalyst was indeed the jobs report. We were worried about a too hot report, surmising that now that everyone had given up on bigger gains that one would pop up. It did, but it was a ‘just right’ report, handily beating expectations but not a huge blowout. With the wage figures flat, many viewed the report as nirvana. Stocks responded but not in a nirvana-like manner. Their action was much more blue collar, just going to work, punching the clock, and grinding out a gain that just happened to be some new multiyear highs for SP500 and DJ30.
http://www.investmenthouse.com/1weekendmarketsummary.htm”>Read “The Daily” Entire Weekend Summary
Here’s a trade from “The Daily” and insights into our trading strategy:
Chart by http://www.stockcharts.com”>StockCharts.com
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http://investmenthouse.com/quote/stkquote.php3?smbl=
NVDA”>
NVDA (Nvidia Corp.)
http://finance.yahoo.com/q/pr?s=nvda”>Company Profile
We are always looking for leaders ready to make a break higher, and we had our eyes on NVDA as it came off the 50 day EMA following an 8 week shallow pullback to test that important support level. When we saw the big volume race into the stock on February 2 that was our signal to move in. We bought some stock positions as well as some June $25 call options to give us a nice leveraged trade. The stock did what we wanted, rallying higher and stair-stepping up the 10 day EMA. A strong stock breaking higher will use the 10 day EMA as support as it bounces higher on its breakout run. This past week NVDA showed signs of topping out, showing a doji on the candlestick chart. After a good quick run we decided to lock in some gain, taking a nice 18% stock gain and a super 103% option gain. The stock has now come back to the 18 day EMA and is showing some dojis at that level. It may be ready to resume the move, and if we get a high volume move off this level we can reload and enjoy the run again.
http://www.investmenthouse.com/1daily1.htm”>Learn more about “The Daily” with Stock Picks! – Issued 5 Times Per Week
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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. http://www.investmenthouse.com/1stocksplits1.htm” target=”_top”>http://www.investmenthouse.com/images2/cnbc.gif” width=”39″ height=”31″ border=”0″ alt=”CNBC Interview”>
Listen to Stock Split Report Editor Jon Johnson’sstock split interview on CNBC-TV! [ http://www.investmenthouse2.com/cntdir.asp?name=JonJohnson-B” target=”_new”>Broadband | http://www.investmenthouse2.com/cntdir.asp?name=JonJohnson-D” target=”_new”>Dial-up ]
Here’s a pre-split play to watch and our current analysis.
Chart by http://www.stockcharts.com”>StockCharts.com
http://www.investmenthouse.com/cc/chssm.gif” width=”360″ height=”208″ border=”1″>
http://investmenthouse.com/quote/stkquote.php3?smbl=
CHS”>
CHS (Chico’s FAS Inc.)
http://finance.yahoo.com/q/pr?s=chs”>Company Profile
We love to play pre-split stocks, i.e. stocks that are ready to make a run into their split. We love them because they are consistent money makers. In late January CHS was testing the 18 day EMA after a solid break higher on some strong same store sales news gapped it higher. That was the opportunity we were looking for with just a few weeks until the actual split. We saw volume move higher on January 28 as CHS moved up off the 18 day EMA and that was our cue to enter. We bought some March $50 call options as it started the move. It then proceeded to give us a classic CHS pre-split run, a nice steady move up the 10 day EMA. Right before the split it started to falter as stocks often do. On a pre-split that is our key to take some gain, particularly with options. That gave us a nice 100% gain for a two week run. Again, that is what we love about the pre-splits.
http://www.investmenthouse.com/1stocksplits1.htm”>Learn more about our Stock Split Report – Issued 5 Times Per Week
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Chart by http://www.stockcharts.com”>StockCharts.com
http://www.investmenthouse.com/cc/ttecsm.gif” width=”360″ height=”208″ border=”1″>
3) Technical Playhttp://investmenthouse.com/quote/stkquote.php3?smbl=
TTEC”>
TTEC (Teletech Holdings–$12.56; +1.01; optionable): Customer management services and database marketing.
http://finance.yahoo.com/q/pr?s=ttec”>Company Profile
After Hours: $12.58
STATUS: Cup w/handle breakout. Volume shot higher Friday as TTEC started the breakout move from its 14 month base. Strong 12 to 6 accumulation in the pattern (12 up price weeks on rising volume to 6 down price weeks on rising volume) shows the big money stepping up to buy in. Strong money flow and relative strength is ready to make the breakout with the stock, a good corroboration of the break higher. Looking to move in on a further move higher on some decent volume.
Volume: 1.854M Avg Volume: 373.954K
BUY POINT: $12.77 Volume=450K Target=$15.45 Stop=$11.88
POSITION: QTC GV – July $12.50c (57 delta) &/or Stocks.
http://www.investmenthouse.com/1tech1.htm”>Learn more about our Technical Traders Report – Issued 5 Times Per Week Chart by http://www.stockcharts.com”>StockCharts.com
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4) Covered Call Playhttp://investmenthouse.com/quote/stkquote.php3?smbl=
DHI”>
DHI – D.R. Horton, Inc. is currently trading at $45.5. The April $45 Calls (DHIDI) are trading at $2.80. That provides a return of about 5% if DHI is above $45 on expiration Friday in April.
http://finance.yahoo.com/q/pr?s=dhi”>Company Profile
http://www.investmenthouse.com/1coveredcalls1.htm”>Learn more about our Covered Call Tables – 8 Tables Updated 5 Times Per Week
* * * SCOTTRADE * * *
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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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