Weekend Newsletter for September 1, 2002
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1) MARKET SUMMARY
To be conservative you could call the action subdued.
– Slow, slow, slow before the long weekend.
– Chicago manufacturing improves, consumer spending strong, sentiment not diving.
– Stocks and indexes at rally points, but pre 9-11 will there be an incentive to buy?
http://www.investmenthouse.com/1weekendmarketsummary.htm “> 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.
DORL (Doral Financial–$42.39; +0.35; optionable): Splits 3:2 on 9-16-02
STATUS: DORL has been toying with us, giving big intraday bounces the past two sessions and then retreating to close. It is trying to make a move, and we are going to stay with it. With $2 intraday moves, if we get in we can get a good ride. The goal is not to make a killing but to take advantage of the pre-split volatility, and this one is giving us that.
Volume: 296.631K Avg Volume: 437.399K
BUY POINT: $42.75 Volume=410K Target=$45.94 Stop=$41.25
POSITION: QDL BG – Feb. $35 c (75 delta, low OI) OR QDL KG – Nov. $35 c (74 delta) and/or Stock.
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http://www.investmenthouse.com/1stocksplits1.htm “> Click here to 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
PIXR (Pixar–$48.84; -0.63; optionable): Monster, Inc., etc.
STATUS: Testing breakout. We had our eyes on PIXR heading into its earnings in its year long cup with handle with good accumulation, and we watched it breakout on huge volume and run up to 51 as well. Nothing like inaction when you see a stock in a good pattern make a move. In any event, as is always the case, PIXR is testing that move now, but holding the lion’s share with a low test at the 18 day MVA (47.73) on Thursday and a bounce up to close right at the 10 day MVA Friday. We look for the stock to test the 18 day MVA again early in the week. If it holds and starts back up we will look at some aggressive positions, but we also like a good move over the breakout high just over 50.
Volume: 320.2K Avg Volume: 396.506K
BUY POINT: $50.25 Volume=580K Target=$56.55 Stop=$48.15
POSITION: PQJ AI – Jan. $45c (71 delta) and/or Stock.
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http://www.investmenthouse.com/1tech1.htm “> Click here to learn more about our Technical Trader Report
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4) Covered Call Play
CTX – Centex Corp. is currently trading at $50.49. The September $50 Calls (CTXIJ) are trading at $2.60. That provides a return of about 4% if CTX is above $50 on expiration Friday in September.
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http://www.investmenthouse.com/1coveredcalls1.htm “> Click here to learn more about our Covered Calls Service
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5) IPOs
Top current and former WorldCom Inc. (WCOEQ.PK) executives scored millions of dollars from hot initial public offerings made available to them by Salomon Smith Barney and its predecessor companies, records released on Friday by the U.S. House Financial Services Committee showed.
Bernie Ebbers, the former chief executive of WorldCom, made some $11.1 million from 21 IPOs, including $4.56 million off the sale of Metromedia Fiber Network (MFNXE.PK) shares and almost $2 million from rival Qwest Communications International Inc. (Q.N) shares, according to the documents.
http://www.investmenthouse.com/1ipo.htm “> . . . continued . . .
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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.
Copyright 1997 – 2002 by Online Investment Services, LP. – All Rights Reserved.
