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Play of the Day (For Tuesday)
Interactive Chart
Monday, May 21, 2001

ITG - Investment Technology $57.80 +0.91

Sunday's Comment:

On Friday, Jeffries Group analyst Charlotte Chamberlain said that ITG stands to benefit from the recent Instinet (INET) IPO, if only because it's a better company. According to Chamberlain, ITG has booked a 32 percent annual growth rate in pre-tax income over the past four years, compared with 9 percent for Instinet. We guess she is suggesting that ITG should be afforded a higher value, which we agree. Unfortunately, though, the market doesn't, as ITG lost $0.71 to close at $53.89. Despite the kudos from Chamberlain, we think ITG might take a breather after this week's strong run. In fact, ITG is now bumping up against resistance at $55.00, so it's possible that it might want to consolidate between $52.50 and $55.00 before attempting another leg up. At this point, ITG has support provided by its 10-dma at $52.16 followed by additional support at its last consolidation base at $50. Traders considering a position in ITG should look for a move through resistance at $55.00 or a bounce off Wednesday's intra- day low of $52.50 on volume of 100,000 shares traded by noon EDT before placing their trades.

Monday's Update:

Since the AMEX Broker/Dealer Index (XBD.X) broke out on Monday, we feel that ITG cannot be far behind. In fact, ITG made a late day run above resistance at $55, but closed just below this level at $54.80. The reason behind our bullish call on ITG is the fact that the brokers are ITG's largest clients. If the market is correct in assuming that the brokerage business is going to heat up, then more brokers should be increasingly willing and able to invest in ITG's automated trading services. Turning to ITG's chart, the stock has formed a small flag formation after just breaking out of its triangle formation last week. The upper part of the flag sits at $55 and marks the pivot point for our play. The flagpole was formed with last Tuesday's and last Wednesday's strong gains. If ITG can break above $55, judging by the height of the flagpole, ITG's next target is at least $58.39. For this reason, traders should wait for a break above $55 on volume that puts ITG on track to do at least 200,000 for the day before initiating a new play.

Picked on May 16th @ $54.52
Change since picked +0.32
Stop Loss @ $51.40


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