Weekend Newsletter for May 25, 2003
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/052503.htm
1) MARKET SUMMARY
Quiet, positive close leaves market in same position.
– Modest gains to close week as leaders bounce further while small & mid-cap utilities rally on tax cut.
– Is deflation winning? Smaller caps, gold trying to say no.
– Smaller issues trying to lead but will the large caps follow?
– 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.
ECL (Ecolab–$51.3; +0.41; optionable): Cleaning products. Splits 2:1 on 6-9-03
STATUS: Flat base. Nice move up off the 50 day MVA for us last week, adding to the move Friday with above average volume. This was a great way to start off the run. New positions can still be taken on a further move from here but not too much further as it approaches the recent high at 52. At that point we want to see it move to 52, take a breather, then power higher again.
Volume: 818.9K Avg Volume: 627.681K
BUY POINT: New: After reaching 52, a pause then move higher on volume (orig. $51.06)
Volume=1M Target=$55.25 Stop=$49.88
POSITION: ECL GJ – July $50c (58 delta).
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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 . . .”
http://www.investmenthouse.com/1stocksplits1.htm
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3) Technical Play
BGEN (Biogen–$40.5; +1.22; optionable): Biotechnology
STATUS: Reverse head and shoulders. Biotechnology is attracting a lot of money, and BGEN’s pattern is indicative of the nice accumulation in the sector. It is moving in a 4-month reverse head and shoulders pattern that is part of a larger cup base that started in November 2002. Accumulation since November is excellent at 9 to 3 (9 up weeks on rising volume to 3 down weeks on rising volume.. Money flow is strong and rising just ahead of price. In this right shoulder BGEN has worked up the 18 day MVA (38.83). It is showing good action as it approaches the neckline or breakout point, and we want to see a nice volume surge again as it makes that move.
Volume: 3.25M Avg Volume: 3.787M
BUY POINT: $40.94 Volume=4.5M Target=$47.55 Stop=$38.07
POSITION: BGQ JU – Oct. $37.50c (69 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
BLUD – Immucor Inc. is currently trading at $20.18. The June $20 Calls (QMQFD) are trading at $1.30. That provides a return of about 6% if BLUD is above $20 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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5) IPOs
When lead manager Bear Stearns did not announce the pricing terms for iPayment’s (Nasdaq: IPMT) IPO on Friday, May 9, 2003, it raised a few eyebrows. When the financial press reported what happened, the news was enough to wag more than a few double chins.
It was widely reported that a Bear Stearns securities analyst was videotaped commenting on the proposed offering.
This IPO column is continued at:
http://www.investmenthouse.com/1ipo.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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