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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.

AZA (Alza Corp--$91.25; +2.19; optionable): Splits 2:1 on November 16. Drugs.
Company Profile
STATUS: Is holding over its breakout level (89.50), but is not showing much conviction on a further move either. The high, made Wednesday before pulling back, is 93.19. Volume has dropped off the past two sessions (950,000 Friday) on the move up. Still, we would like to play AZA once again, having missed the move on Friday. Excellent money flow and good buying.
PLAY: Over 93.19, with stock and/or January $90 calls to buy (AZA AR).

Chart by StockCharts.com

The seventh and final IPO of the week was completed when Syngenta, a Swiss agribusiness firm, priced its offering Friday afternoon. The company is the result of the merger of Novartis and Zeneca.

(This IPO story is continued on our website in the IPO Forum.)