us stock market, trend trading stock

- Market was ready to take a breather on Friday, but decides to sell given rehashed PC/chip report, Middle East oil issues.
- Fed pause seems quite appropriate (and likely not enough) as first run at Q3 GDP already at the lowball estimates.
- Fed has followed oil prices with its hikes and should have started cutting already.
- Sentiment reports defy sentiment polls.
- Friday afternoon drop was a jolt that needs a positive answer this week on NASDAQ, SP600.

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

Chart by StockCharts.com

Company Profile
EARNINGS: 11-1-06 before the open
STATUS: Flying plateau. A new issue in late May, MA really got its wheels off the July low, making its first run, and it was a strong one. It hit 75 on that move and needed a breather, fading to the 18 day EMA (70.56) and then working laterally the past three weeks on very low volume, consolidating and setting up the next break higher. Strong volume Friday, this one on an upside move, shows it is ready to start the next run.
Volume: 2.674M Avg Volume: 1.576M
BUY POINT: $73.11 Volume=2.3M Target=$8775.00 Stop=$69.94
POSITION: MA DO - Apr. $75c (51 delta) &/or Stock

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).

For post-splits, we can play them as we would pre-splits (very short term), but we prefer to stretch our horizons, playing the trend. When playing options, we look further out, 2 or more months at least. We let the trend carry us along if there is one, but we will also take profits if the technical pattern degenerates, e.g., breaks a trendline. The main difference between post-splits and pre-splits plays is that we really have to like the pattern. Pre-splits can run right before their splits even with poor technical indicators. For post-splits, we are looking at the stocks from more of a longer term "would I buy this stock at this juncture?" position. Now there are times when a hot stock splits and investors pile in to get in while the stock is 'cheaper.' We play those, but with more of a short-term, pre-splits mentality in that we will be ready to get out fast if the momentum fades.

Remember, everything we do has to pass muster with the market that day ... don't fight the market on these plays.

Here's a post-split play and our current analysis.

Chart by StockCharts.com

Company Profile
Sex sells but as seen in the commodities rally, it doesn't take sexy to make some mighty nice money. After the commodities correction following the May run we had our eyes on NUE, a solid leader in its sector that had set up a ranging double bottom base. It surged off the 200 day SMA in early October, and that caught our attention; strong moves off of that key support always do. We put it on the report, and three sessions later it cleared some interim resistance in its base. We like to see a stock clear resistance with volume as that shows us the big money is behind it.

We entered some stock positions at $53.09 and some January $52.50 strike call options at $5.60. The 54 delta was strong enough to give us some good gain on the move we anticipated from the stock. That initial momentum pushed NUE to $57.50. It topped out some on that move, showing us it was losing some momentum on the breakout with a couple of closes well off the intraday high. We could have banked some gain but decided to ride it through the test given that earnings were around the corner and we could get another run into them. NUE spent the next four days consolidating the move with a modest pullback. It then blasted higher on 10-24 on those earnings. THAT was the move we were looking for and we banked some solid gain, selling some stock for $61 (+14.9%) and options for $11 (96%). After that move it started back to test on lower volume. We are looking for a test of the 10 day EMA to give us another entry point after the initial profit taking on the earnings is over. Again, not sexy, unless you don't look at the gains.

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