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1) MARKET SUMMARY
Stocks finish a tough week with a rebound, but can only finish mixed.
- Economic data softens a bit, stocks, at least some, rebound a bit.
- Economic data slows its pace a bit but the trend is still solid.
- Market still building its base, setting up for the next leg higher.
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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). 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.
BKST (Brookstone--$27.41; +0.43; no options): Specialty retail. Splits 3:2 on 4-27-04.
Company Profile
STATUS: Flying plateau. Moving laterally the past two weeks over the 10 day MVA (26.85) after a strong surge from 21 in mid-March. Two strong above average volume spikes in the past week on upside sessions are telling us to get ready for a potential break higher. These are solid patterns because the stock refuses to give up its gains. Strong money flow is leading higher and we are looking for the stock to follow on continued good volume as seen on Friday.
Volume: 149.65K Avg Volume: 96.509K
BUY POINT: $27.78 Volume=145K Target=$31.95 Stop=$26.68
POSITION: - Stock (no option chain).
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