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1) MARKET SUMMARY
Stocks head into long weekend with a setup for next week.
- Bulls win the rubber match as stocks post solid price gain.
- PPI lower thanks to energy but is going to be higher thanks to energy.
- Manufacturing production and space utilization on the rise.
- Interest rates are still the key to the market (along with oil).
- Friday bounce sets up stocks for follow through next week, but this is a 'show me' market at this stage.
- Earnings, interest rates and oil versus a market rebound.
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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.
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Company Profile
STATUS: Double bottom w/handle. CPO has formed a neat little 6 week base as it gets ready for its pre-split run, using the 50 day EMA (52.52) in early January to set the second leg of the pattern. That triggered the rebound, and then the stock moved laterally last week over the 18 day EMA (53.66), forming the handle. Nice 2 to 0 accumulation (2 up price weeks on rising volume to 0 down price weeks on rising volume) in the short pattern shows it has been used for accumulating the stock as opposed to selling it. Money flow is strong and rising as the stock moves laterally, a further good indication of ongoing buying. Looking for volume to kick up as it continues the move.
Volume: 146.8K Avg Volume: 244.454K
BUY POINT: $54.85 Volume=300K Target=$60 Stop=$53.44
POSITION: CPO DK - Apr. $55c (47 delta).
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