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1) MARKET SUMMARY
Lackluster session holds up just enough to give market its first up week for the year.
- Indices post first positive week of 2005 but still struggling below key resistance.
- Export decline drops initial Q4 GDP reading well below expectations.
- Employment cost index declines in Q4 as wages fall, benefit costs rise.
- Stocks sluggish and still show negative bias, but again refuse to sell off significantly.
- Many look to the Iraqi election, but the market looks to basics.
- Earnings past high point as economic data takes center stage along with Fed.
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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: Test 50 day EMA. COH moved off the 50 day EMA (53.10) on rising volume Friday, a decent move given the tenor of the overall market. Classic action with the breakout from a four month double bottom base and then a run up the 18 day EMA (54.67). Great move. Now it is making the 50 day EMA test that sets the next move up the short term MA, at least for a strong stock. COH has run a long way, but that base helped set the stage for the run. Looking for a continued move on continued solid trade to enter the position ahead of its split.
Volume: 1.694M Avg Volume: 1.538M
BUY POINT: New: $55.06 (orig. $54.89) Volume=2.3M Target=$61.45 Stop=$52.88
POSITION: COH EK - May $55c (48 delta) &/or Stock.
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