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Be sure to read our Stock Splits Manual. 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.

BOBJ (Business Objects--$75.88; -0.18; optionable): Splits 3:2 effective March 12.
Company Profile
STATUS: Software. Held up pretty well, gapping back down near its 18 day MVA (72.88) before pushing back up a bit. Volume was very low at 394,200 (average 612,000), and holding up on a day like Friday is a good sign. We will see if the stock can make another move up toward the 200 day MVA (82.41), which turned the stock back on its last move. Buying is very strong.
PLAY: A move up from here, with stock and/or March $70 calls to buy (BBJ CN-very low open interest).

Chart by StockCharts.com

Stock Split Report: We have been following American Eagle Outfitters (AEOS) in anticipation of a run into its February 26 split, and the stock has not disappointed. Since adding the stock to our Stock Split Report, it has broken out and climbed over $12, a whopping 25% move, and the past week alone we have seen a run of over $6, or almost 12% as the stock again closed Thursday at a new high.
Click here for more information on our Stock Split Report!