Weekend Newsletter for October 19, 2003
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/101903.htm
1) MARKET SUMMARY
Earnings are still positive overall, but market is starting to take them for granted.
– Market hits earnings saturation point, uses it as an excuse to sell.
– Economic data continues to impress, boding well for future market advance.
– Market turns down sharply, falling to near support but on lower volume.
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.
OTEX (Open Text–$43.15; -0.48; optionable): Internet software and services. Splits 2:1 on 10-29-03.
STATUS: Testing the breakout. After a nice surge from early October to Tuesday OTEX is making a small pullback on light volume. Very orderly test of a very strong move. It may come back to test the 10 day MVA (41.56) before it is ready to go again, but it is entering that zone where pre-split plays get a lot of life ahead of the actual split. Excellent money flow and a relative strength breakout. Letting it make the comeback a bit more, and then will look for a move up on above average trade.
Volume: 178.167K Avg Volume: 389.217K
BUY POINT: $44.12 Volume=500K Target=$50.75 Stop=$41.38
POSITION: QFT BI – Feb. $45c (45 delta) &/or Stock.
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3) Technical Play
SNCI (Sonic Innovations–$7.4; -0.37; no options): Medical appliances.
STATUS: Testing the breakout. SNCI broke higher Wednesday on a nice above average volume surge. The move took it out of a 7 week flat base sporting outstanding 4 to 0 accumulation. The modest selling Thursday and Friday was on much lower, below average volume. Looking for it to hold the 10 day MVA (7.12) and then rally back on rising volume. Strong money flow and relative strength made the breakout on the move, an indication of the move’s strength.
Volume: 33.037K Avg Volume: 79.912K
BUY POINT: Test 7.12, then $7.28 on the way back up. Volume=120K Target=$9.12
Stop=$7.06
POSITION: Stock (no option chain).
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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
THO – Thor Industries, Inc. is currently trading at $60.3. The November $60 Calls (THOKL) are trading at $2.90. That provides a return of about 4% if THO is above $60 on expiration Friday in November.
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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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