The Charles Schwab Corp. is a provider of securities brokerage and related financial services, including retail, telephone and Internet-based brokerage operations. For the 3 months ended 3/31/01, revenues fell 30% to $1.2B. Net income fell 68% to $97M. Revenues reflect reduced equity online pricing, lower average revenue per share traded and lower levels of margin loans to clients. Earnings also suffered from the expenses for facility expansion.

May 22, 2001

The share price of this leading brokerage concern is starting to rise for two principle reasons. First, the recovery in the stock market inevitably leads to more investor enthusiasm, which results in more trading activity that ultimately results in more commissions. Secondly, Schwab has made aggressive efforts to slash its workforce and cut its expenses, which should enable the company to improve its profits later this year. In the short term, it looks like the momentum that the stock is seeing could continue. We especially like the rising volume (today's volume was a solid 6.25 million, which was nearly 1 million more shares than the average daily volume of 5.35 million). The stock's current cup and handle breakout may find resistance at a previous spike high of $23.16. Therefore, a move above today's high of $21.60, accompanied by midday volume exceeding 2.75 million, could result in a good lower risk entry point. More aggressive traders might consider entering as long as support at $21.10 holds up. The Money Flow has been solid and points towards more gains for the stock. Another positive development is the fact that the MACD is on the verge of issuing a buy signal. We also like the RSI, which has plenty of upside potential before indicating an overbought condition.

Picked on May 2nd @ $21.18
Change since picked +0.00
Stop Loss @ $18.50

May 24, 2001

Schwab's breakout earlier this week appeared to warrant a quick advance to resistance at $23.16. However, there was a hiccup in this move, as the market corrected yesterday. The good news is that the decline on Wednesday was accompanied by volume that was 2.5 million shares less than the volume that accompanied today's advance. This means that there is far more interest in buying SCH on up days than selling the stock on down days. If this pattern continues, the OBV and Money Flow should both improve and these technical indicators could ultimately confirm that SCH is on its way to establishing a sustainable rally. A positive day tomorrow would likely cause the MACD to issue a buy signal, which would lend more credence to the extended rally theory. Momentum traders should be looking to buy SCH tomorrow if the stock can trade above the $21.59 resistance accompanied by midday volume exceeding 300,000 shares.

Picked on May 2nd @ $21.18
Change since picked -0.28
Stop Loss @ $18.50