us stock market, trend trading stock

- Quiet Friday expiration helps set up a good holiday week.
- Housing start slump and builder sentiment setting a housing bottom?
- Leading indicators show economic turn back up, continued falling inflation: economic nirvana possible, but can the Fed afford to acknowledge it?

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

Chart by StockCharts.com

Company Profile
The stock of exchanges are some of the hottest in the market, and we have been playing them as they have provided entry points. NYX, ISE, ICE and others are getting a lot of money, and that means they can make some strong, fast moves. ICE is one we have played several times since its IPO, and in October it broke higher again and then fell abruptly mid-month. It came back to the 18 day EMA, undercut it, but then immediately recovered this near support level the next session on very strong volume. That told us some big money was supporting it, so we put the play on the report, waiting for the next bounce off the 18 day EMA. That came on 10-24-06 and we moved in with some stock positions at $83.64 and some December $80 strike call options at $9.30. We waited to see the bounce higher because we wanted to limit our time in the play and thus put our money to maximum use.

ICE moved higher in the following days, but traded in a volatile fashion as it did move higher. Overall price/volume action remained positive (higher on upside sessions, lower on downside moves) so we let it work higher for us, knowing it can tear off big chunks once it gets going. The good price/volume action showed us there was no selling, so we were willing to let it work through this volatility for the next move higher. That came on 11-14 when it surged $8 following a good $3 move off the 18 day EMA the previous session. It took a couple of days off on low volume (again, no sellers coming in) and then shot higher on 11-17 for another $6.60 gain in sympathy with the NYMEX IPO. Given that sympathy move we decided to take part of our position off the table, selling some stock for $99.90 (19% gain) and some of our options for $21.90 (136% gain). We will let it run as far as it will on this move and then when it tests, look for the next opportunity.

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
STATUS: Test breakout. Okay, it has been a long time since NVLS split, but when we saw this pattern setting up we wanted to get it on the report. NVLS broke out from a nine month cup with handle base on last Monday, rallied higher to 32 on Wednesday, and then started a nice test, tapping at the 10 day EMA ($30.02) on the Thursday and Friday lows. Nice test underway and it may take another session to fully complete the test, but the move is solid and we are ready to move in as NVLS makes the rebound on some rising trade.
Volume: 4.523M Avg Volume: 3.946M
BUY POINT: $31.24 Volume=3.9M Target=$37.42 Stop=$29.95
POSITION: NLQ CF - Mar. $30c (57 delta) &/or Stock

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