Weekend Newsletter for May 16, 2004
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/051604.htm
1) MARKET SUMMARY
Another uninspired session to end a tough week.
– Market limps into weekend, trying to hang on to try a further bounce this week.
– Mixed CPI, strong inventories and production stoke further inflation fears.
– Market set up for bounce, but patterns less than inspiring.
– Subscriber Questions.
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.
BR (Burlington Resources–$67.30; +2.15; optionable): Independent oil and gas
STATUS: Test 50 day EMA. BR is one of the stronger oil and gas stocks, and it is making one of its periodic 50 day EMA tests as it rallies following its late December breakout. It came under some pressure last week as the oil stocks dumped lower, but it held the 50 day EMA (64.29) and has rebounded nicely. Looking for more volume to come in as it continues the move, but this one has a lot of support from institutions and we are ready to move back in ahead of the split.
Volume: 1.474M Avg Volume: 1.459M
BUY POINT: $67.57 Volume=1.7M Target=$73.62 Stop=$66.12
POSITION: BR HM – Aug. $65c (71 delta).
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3) Technical Play
EFII (Electronics for Imaging–$27.02; -0.03; optionable): Application software
STATUS: Cup. Volume surged Friday as EFII moved toward the breakout but could not hold the move to the close. A very nice handle has formed to its 15 week cup. Excellent money flow is surging and accumulation is outstanding at 8 to 2 (8 up price weeks on rising volume to 2 down price weeks on rising volume). Volume is coming in and now it needs to show us the breakaway move on continued strong volume.
Volume: 1.417M Avg Volume: 497.772K
BUY POINT: $27.48 Volume=725K Target=$32 Stop=$25.78
POSITION: EFQ JE – Oct. $25c (76 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
CTX – Centex Corp. is currently trading at $45.66. The June $45 Calls (CTXFI) are trading at $2.55. That provides a return of about 4% if CTX is above $45 on expiration Friday in June.
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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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