us stock market, trade stock

- Market ends the week cocked and loaded, but doesn't pull the trigger.
- Recession, slowdown, or 3% growth? Aiming for the middle.
- Knowing when to take an interim gain.
- Last week of August and just looking for another week-long move ahead of September.

Here's a trade from "The Daily" and insights into our trading strategy:

Chart by StockCharts.com

Company Profile
After the second leg higher in this rally off the July low, we were looking for stocks that remained weak during that run, looking for some downside gain as the pullback continued. RS had rebounded with the market, but only returned to near resistance in its 8 week downtrend, tapping at the 18 day EMA on very low, below average volume. It tapped the 18 day on 8-16-06 on low volume and we put it on the report the next day as it waffled at that near resistance. The idea was to buy puts on the stock as it broke lower from this resistance and continued its downtrend. It continued lower on 8-18 and we moved in with some September $35 strike put options, buying them at $2.70. With a -55 delta and the stock falling roughly $2.50 on each leg lower we stood to make some solid money as it turned back down.

RS continued lower after that test of resistance as we figured it would. When a stock is in a firm downtrend and fails to break through this near resistance level, it will continue to fall until it can change its character. RS was not ready to change its character. It fell 0.39, then 0.29, then really picked up the pace with a 1.32 drop. On 8-24 it fell another 0.27 on the close, but intraday hit our target. We sold our options for $4.40, banking a solid 62.9% gain on that leg lower. RS is likely to try and bottom now and rebound as the market rebounds this week. We will let it rebound and then look to play it once more if it fails again at the near resistance.

Even with the market ready to move up for a third upside leg, by looking at weaker sectors and stocks within established downtrends in those sectors we were able to use the market downturn to make some solid gain while we wait for our upside plays to set up and rally this coming week.

Learn more about "The Daily" with Stock Picks! - Issued 5 Times Per Week

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

Company Profile
STATUS: Test 10 day EMA. CXW jumped up early last week but started to fade so we took some modest gain on the play, waiting to see if it came back to hold support so we could reload. Friday it broke below the 10 day EMA (62.70) intraday but then rebounded to close flat. That is what we wanted to see. Now we are looking to move back in with some options as CXW rebounds on some rising trade ahead of its split. A move to the target lands a 55+%ish gain.
Volume: 186.8K Avg Volume: 403.271K
BUY POINT: $63.22 Volume=405K Target=$68.75 Stop=$62.18
POSITION: CXW LM - Dec. $65c (43 delta)

Learn more about our Stock Split Report and how we have made gains of 321% with our powerful stock split plays!
Details Here.