Weekend Newsletter for May 30, 2004
Investmenthouse Newsletter
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Weekend Newsletter for May 30, 2004
Table Of Contents 1) MARKET SUMMARY 2) PRE-SPLIT PLAY 3) TECHNICAL PLAY 4) COVERED CALL PLAY
Stock Split Notices Investing Q & As Glossary
1) MARKET SUMMARY
Market slides into weekend quietly, but action is positive.
– Flat lining into the weekend.
– Manufacturing is on fire.
– Market avoids selloff, posts a modestly constructive session to cap a positive week.
Read Full Weekend SummaryLearn more about our Daily Newsletter with Stock Picks! – Issued 5 Times Per Week
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. Chart by StockCharts.com
NOC (Northrop Grumman–$103.13; -0.87; optionable): Aerospace/defense. Splits 2:1 on 6-22-04.
Company Profile
STATUS: Cup. Nice 14 week cup base has formed roughly over the 50 day EMA (99.80), holding up well as the market came under pressure. It has rallied up to the prior high near 104 on mostly above average volume. Positive 3 to 2 accumulation (3 up price weeks on rising volume to 2 down price weeks on rising volume) in the base and money flow running higher ahead of price. It hit 104 Thursday then backed off some Friday. May take a few more days to ease laterally before making the move. Looks solid and we want to see strong volume as it moves through the buy point.
Volume: 715.9K Avg Volume: 786.454K
BUY POINT: $104.12 Volume=1M Target=$112.25 Stop=$101.32
POSITION: NOC HA – Aug. $105c (42 delta).
Learn more about our Stock Split Report – Issued 5 Times Per Week
Chart by StockCharts.com
3) Technical Play
ECSI (Endocardial Solutions–$9.70; -0.14; no options): Scientific & technical instruments.
Company Profile
STATUS: Double bottom w/handle. Moving laterally to end the week, starting the handle to a 14 week base sporting excellent 5 to 1 accumulation (5 up price weeks on rising volume to 1 down price week on rising volume). That shows money moving into the stock even as it bases. Money flow remains strong and ahead of price even as the stock moves laterally. Daily volume is not huge, but this looks like a very interesting play with all of the accumulation.
Volume: 98.474K Avg Volume: 115.227K
BUY POINT: $10.05 Volume=173K Target=$12.12 Stop=$9.35
POSITION: – Stock (no option chain.
Learn more about our Technical Traders Report – Issued 5 Times Per Week Chart by StockCharts.com
4) Covered Call Play
WGO – Winnebago Industries, Inc. is currently trading at $28.40. The July $27.5 Calls (WGOGY) are trading at $2.10. That provides a return of about 5% if WGO is above $28.40 on expiration Friday in July.
Company Profile
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 asscociated herewith receives compensation in any manner from any of the companies that are discussed in this newsletter or on the related websites.
