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Free Weekend Newsletter for November 4, 2001

Free Stock Split Email Notices       Investing Q & As       Glossary

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.

Chart by StockCharts.com

MIKE (Michaels Stores--$51.02; -0.90; optionable): Announced a 2:1 stock split Wednesday, effective November 15!
Company Profile
STATUS: The pullback continued Friday, and support continues to hold. After the great move last week (the third solid move of the month, which started with the stock near 33), the stock has pulled back into a nice-looking consolidation. It has been gradually decreasing, on generally lower volume (except for the excitement from Wednesday’s announcement), and is holding support over the 10 day MVA (50.68). MIKE closed the week with an initial test up toward the recent pattern highs (53.74), but then fell back to the 10 day to close as volume picked up slightly to 608,700 (average 421,100). We want to see this support continue to hold, and the increased volume on the reversal Friday will test that support. MIKE has made quite a run, but with the announcement we expect it to hold and the stock could be ready to surge again after this rest. At this stage (a potential 4th run) we will be very careful to protect positions with stops. Current target: 57.50, but on a strong breakout we will adjust to 60.
BUY POINT: Riding current positions toward the target. The aggressive can look at positions on a strong move up over 52. Stop: 49.50. The breakout move is a buy point of 53.86 on increased volume. Stop: 50.50.
POSITION: Both buy points: December $50 calls to buy (IKQ LJ).

Click here for more information on our Stock Split Report!

MTD (Mettler Toledo--$48.81; +2.61; no options): Scientific & Technical
Company Profile
STATUS: Breaking out of a cup with handle with a buy point at 48.13 (one-eighth point above 2 prices hit late October). Volume was huge at 489,600 (avg. 127,363), and we are looking for the move to continue from here. The base is part of a larger cup that formed since the first of the year, and the stock has really come up nicely off the September lows near 37 which mark the bottom of the base. Remains a buy on this breakout move, and is showing super money flow and buying, and relative strength breaking out. Target: 58 (highs at the start of the base are at 56; we will look for another handle to form for a breakout from the larger base).
BUY POINT: A buy up to 50.54. Stop: 45.57 (7% below a buy point of 49, and below the 18 day MVA, 45.88).
POSITION: Stock.

Click here for more information on our Technical Traders Report!

GE - General Electric Co. is currently trading at $37.96. The December $37.50 Calls (GELS) are trading at $2.35. That provides a return of about 5% if GE is above $37.50 on expiration Friday in December.
Company Profile

Click here for more information on our Covered Call, Credit Spread and Leaps Service!

Aluminium Corporation of China, the listing vehicle of the mainland's largest aluminium group, is expected to begin pre-marketing its initial public offering on Monday, with research analysts briefing underwriters on the deal.

The IPO, tentatively sized at about US$300-$500 million, would be launched on December 19, following the two-week pre-marketing, which has already been delayed from October.

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