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- Modest reflex bounce keeps indexes in trading range.
- Preliminary sentiment still upbeat but below expectations, tech companies pushing hard to close the quarter positive.
- Selling eases off but the leading tech and small caps continue to trail.
- Subscriber Questions.
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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).

For post-splits, we can play them as we would pre-splits (very short term), but we prefer to stretch our horizons, playing the trend. When playing options, we look further out, 2 or more months at least. We let the trend carry us along if there is one, but we will also take profits if the technical pattern degenerates, e.g., breaks a trendline. The main difference between post-splits and pre-splits plays is that we really have to like the pattern. Pre-splits can run right before their splits even with poor technical indicators. For post-splits, we are looking at the stocks from more of a longer term "would I buy this stock at this juncture?" position. Now there are times when a hot stock splits and investors pile in to get in while the stock is 'cheaper.' We play those, but with more of a short-term, pre-splits mentality in that we will be ready to get out fast if the momentum fades.

Remember, everything we do has to pass muster with the market that day ... don't fight the market on these plays. Here's a post-split play to watch and our current analysis.

Chart by StockCharts.com

SBUX (Starbucks--$26.64; +0.31; optionable): Coffee shops.
Company Profile
STATUS: Testing the breakout. The 3 week pullback from the early July breakout has formed a handle on a 10 week cup base. Very nice pullback on lower volume, holding the 18 day MVA on the Friday low (26.10) and rebounding sharply to the close. Solid accumulation and money flow on this very orderly test. We look for a strong jump back up on volume to enter new positions.
Volume: 2.992M Avg Volume: 4.328M
BUY POINT: New: $27.62 (orig. $26.30) Volume=6M Target=$30.94 Stop=$25.85
POSITION: SQX JE - Oct. $25c (58 delta) &/or Stock.

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