Weekend Newsletter for May 22, 2005
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Weekend Newsletter for
May 22, 2005
Table Of Contents 1) MARKET SUMMARY 2) PRE-ANNOUNCEMENT 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
Expiration Friday provides no fireworks, and that is good.
– Quiet session is a good session.
– Greenspan issues housing equivalent of ‘irrational exuberance,’ doesn’t see long bond staying low.
– More on deficits.
– EU posts some more weak numbers.
– NASDAQ provides leadership again as previous and current leaders rest up.
– GDP set to be revised upward, but how will investors take it?
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Market Summary (continued)
Volume started a bit heavier Friday as expiration was coming, but after mid-morning volume started to trail off and by the close it was downright low. That was good because the first action of the day was selling, and by the close the NYSE indices were still negative though just barely. The lighter volume showed no distribution.
The indices also turned and drifted higher into the close. NASDAQ and SOX closed out positive, leading the drift higher. SP500 closed negative, still below its April high, but it also recouped most of its loses, and that means holding most of its gains from the strong rebound and follow through. Indeed, that was the story for most of the leaders as well: a quick test of the near support on low volume and then a rebound. They are being stingy with their gains, and that is just another indication of the bullish attitude in the current move.
It was not all candy and roses. It could have been worse. China surprised everyone with a most peculiar self-imposed tariff on textile EXPORTS that in some cases rises to 400%. Now let’s see. We all agree to remove all tariffs and subsidies and allow free trade on textiles between China and the US. That is in effect for a couple of months. Then the US browbeats China to un-tether the yuan from the dollar. China refuses; of course it would because China never responds to this type of open criticism. Or does it. China says it will handle the yuan in its own way. The Bush administration then says it will impose tariffs on certain Chinese textile imports. What was all of that free trade negotiation for? Then China comes out with this self-flagellating export tariff, the last thing most expected. We talked to many economists Friday who were scratching their heads with some surprise. The answer seems rather obvious when you think about it: China wants a stable currency, and to get the US off its back it offered the tariffs instead.
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=
CCI”>
CCI (Crown Castle Intl.–$16.95; -0.25; optionable): Telecom.
http://finance.yahoo.com/q/pr?s=cci”>Company Profile
STATUS: Cup w/handle. Volume started higher Wednesday, as CCI started toward the breakout point from its 19 week base that formed using the 200 day SMA (15.88). Great, stupendous 8 to 1 accumulation in the base (8 up price weeks on rising volume to 1 down price weeks on rising volume); lots of buying during the base. That rising volume to end the week has us looking for the breakout this week as CCI follows the solid money flow higher.
Volume: 725.4K Avg Volume: 1.052M
BUY POINT: $17.36 Volume=1.6M Target=$20 Stop=$16.69
POSITION: CCI JW – Oct. $17.50c (54 delta) &/or Stock.
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.
Pre-announcements are where we put in the long hours of research, chase down leads and rumors, and pump our contacts for information in order to determine if a split is in the works and to pinpoint an announcement date. Pinpointing the date is our primary goal as this allows us many more options in how we play a split. As we primarily focus on leadership stocks in good technical patterns, if we see the stock make the breakout we will get in earlier and ride the wave of speculation up to or through the announcement. Pinpointing a date and time also allows us to open positions immediately prior to an announcement, minimizing our exposure time to the market whims. We employ this strategy regularly in a number of situations. When we have ridden a stock for a few days, a week, a few weeks, up to the forecast announcement, we often have a lot of profit built in. After all, these are leaders and they attract attention moving into earnings, shareholder meetings, etc. We often sell some positions (all or a partial), lock in the profit, and take positions with higher strike call options near the current stock price at a cheaper cost if the stock is not overextended, i.e., has done all of its running before the forecast announcement. This way we bank some profit from the early run, and take some of that profit to play the actual split. Even if the board pulls a fast one on us and does not announce, we still have profit in the bank. This method also works well when the market is choppy, and we do not want to hold positions long. We can often buy right before the announcement and then sell when we feel the split announcement has run its course and the stock starts to pull back. Narrowing the predicted date and time of the split gives us these options.
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Here’s a pre-announcement play to watch and our current analysis.
Chart by http://www.stockcharts.com”>StockCharts.com
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http://investmenthouse.com/quote/stkquote.php3?smbl=
URBN”>
URBN (Urban Outfitters)
http://finance.yahoo.com/q/pr?s=urbn”>Company Profile
We were watching URBN for a possible split play, but it certainly did not hurt at all that the stock had formed a base on base pattern the past six months. URBN started breaking higher from a short double bottom with handle on 5-9-05 with volume moving up to average. That was the move we were looking for, and we entered the play with stock positions and some September $45 strike call options. They were trading at $5.50 with a 55 delta; not bad given they were $1.53 in the money at the time. We like buying into stocks in good patterns with good volume breakouts. If you can read the pattern right you know there is accumulation ongoing. That means the big money is buying it and eventually it should break higher. The strong volume on the break higher shows it is still in demand as it clears resistance. That typically means a stronger move and one that has more staying power. That was the case with URBN as it rallied higher over the next 8 sessions. After such a strong move you often get a pullback, but you also have a stock that has the potential to move even further. What to do? We took a partial gain, banking some solid 11% stock profit and 67% option profit. We will let the remaining positions work for us and may even look at some more positions on a test of near support that holds and starts to rebound.
Learn more about our Stock Split Report and how we have made gains of 321% with our powerful stock split plays!
http://www.investmenthouse.com/a/StockSplitReport.html”>Details Here.
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Chart by http://www.stockcharts.com”>StockCharts.com
http://www.investmenthouse.com/cc/antsm.gif” width=”360″ height=”208″ border=”1″>
3) TECHNICAL PLAYhttp://investmenthouse.com/quote/stkquote.php3?smbl=
ANT”>
ANT (Anteon Intl.–$43.89; +0.11; optionable): ITS software.
http://finance.yahoo.com/q/pr?s=ant”>Company Profile
STATUS: Cup w/handle. ANT broke sharply higher Wednesday on strong volume, breaking out from a nicely formed 20 week base. It fell back Thursday and Friday with the market, holding over the 10 day EMA (43.21). The base was solid, using the 200 day SMA (37.79) on the lows, bouncing off that level and showing the big money was still stepping in to buy the stock. Solid 6 to 4 accumulation in the base (6 up price weeks on rising volume to 4 down price weeks on rising volume) shows that support. Strong money flow is leading as well. Looking for a strong volume bounce from here to start positions as this 3 year old stock heads to a new all-time high.
Volume: 936.4K Avg Volume: 493.841K
BUY POINT: $44.35 Volume=741K Target=$60 Stop=$43.05
POSITION: ANT JI – Oct. $45c (50 delta) &/or Stock.
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=
CMC”>
CMC – Commercial Metals Co. is currently trading at $24.57. The June $25 Calls (CMCFE) are trading at $1.05. That provides a return of about 6% if CMC is above $25 on expiration Friday in June.
http://finance.yahoo.com/q/pr?s=cmc”>Company Profile
http://www.investmenthouse.com/1coveredcalls1.htm”>Learn more about our Covered Call Tables – 8 Tables Updated 5 Times Per Week
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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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