Weekend Newsletter for May 23, 2004
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/052304.htm
1) MARKET SUMMARY
Market leaves town quietly after Wednesday reversal.
– Expiration a sleeper as market continues lateral, low volume move.
– Oil falls as Saudi promises more production.
– Expiration is over, but same problems still present.
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.
ERES (Eresearch Tech–$33.3; +0.5; optionable): Medical labs. Splits 3:2 on 5-28.
STATUS: Cup w/handle. The week before the split and ERES is showing more life to close out last week. Looking for the momentum to kick in and push ERES toward the breakout from its 16 week base. Has been toying with the breakout, but need to see that volume.
Volume: 416.325K Avg Volume: 894.545K
BUY POINT: New: $33.15 (orig. $32.95) Volume=1.3M Target=$37.92 Stop=$31.18
POSITION: UDB IZ – Sept. $32.50c (55 delta) &/or Stock.
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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
MANT (Mantech Intl.–$25.60; +0.61; optionable): Business software
STATUS: Cup w/handle. Volume was up and above average Friday as MANT moved off the 18 day EMA (24.80), the support that held in the handle. Strong 9 to 5 accumulation (9 up price weeks on rising volume to 5 down price weeks on rising volume) shows money moving into the stock during this base. Indeed, money flow is turning higher ahead of price, and it looks as if MANT is ready to follow it on up.
Volume: 379.779K Avg Volume: 295.045K
BUY POINT: $26.12 Volume=443K Target=$30.22 Stop=$24.55
POSITION: UUU NE – Aug. $25c (60 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
MCHP – Microchip Technology Inc. is currently trading at $30.17. The June $30 Calls (QMTFF) are trading at $1.40. That provides a return of about 4% if MCHP is above $30 on expiration Friday in June.
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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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