Weekend Newsletter for May 2, 2004
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/050204.htm
1) MARKET SUMMARY
Investors find nothing to like about the market.
– Apropos ending to an ugly week.
– Economic data continues its strong run.
– NASDAQ undercuts its 200 day SMA but no reversal.
– Stage set for FOMC, jobs report week.
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.
IEX (Idex–$47.25; +0.19; optionable): Machinery. Splits 3:2 on 6-1-04
STATUS: Breakout test. IEX shot higher two weeks back on solid trade, running to 48.60 on the high. As the market sold off IEX made a very calm, orderly breakout test, holding most of its gain as it moves laterally over the 10 day EMA (46.52). Excellent money flow and relative strength that is breaking out again even as the stock tests, a very bullish sign. Volume bumped back up Friday as it posted a modest gain, but it is telling us to be ready for the breakout run to resume.
Volume: 255.4K Avg Volume: 145.141K
BUY POINT: $47.78 Volume=218K Target=$53 Stop=$46.32
POSITION: IEX GI – July $45c (82 delta).
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http://www.investmenthouse.com/1stocksplits1.htm
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3) Technical Play
PRGO (Perrigo–$21.47; +0.05; optionable): Drugs
STATUS: Breakout test. A strong breakout move a week back was tested last week, coming back to the 10 day EMA (21.48) on lower though solid volume. Very good action given that the overall market was selling off on volume. Nice breakout and test to fill the gap, showing a doji on the candlestick pattern Friday, indicating that it is ready to resume the move. Excellent money flow and a relative strength breakout. Just looking for a move through the buy point on some continued strong volume.
Volume: 608.771K Avg Volume: 474.59K
BUY POINT: $22.06 Volume=712K Target=$25.95 Stop=$20.88
POSITION: IQH HD – Aug. $20c (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
SPF – Standard Pacific Corp. is currently trading at $50.45. The June $50 Calls (SPFFJ) are trading at $3.10. That provides a return of about 6% if SPF is above $50 on expiration Friday in June.
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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.
Copyright 1997 – 2004 by Online Investment Services, LP. – All Rights Reserved.
