us stock market, trend trading stock

- CPI gives investors an early Christmas present, but they almost act as if they want to return it.
- Transition in progress, trying to beat the Christmas rush?
- Soft landing approaching? CPI growth slowing for second month even as retail sales solid.
- Stocks still set to move higher into Christmas despite lukewarm response to CPI.

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

Chart by StockCharts.com

Company Profile
In an expanding economy, new companies are being born and new products give life to older companies. STEC was a new issue in late 2000 and enjoyed gains before going dormant in 2004 and 2005. This year it came to life and after its initial run started into a base we started watching closely to get in on the next move higher after it took a breather. We put it on the report 11-15-06 after volume resumed on a break higher off a test of support in its base. The next session volume was up again and we moved in with some stock positions at $9.15 and some February $7.50 strike call options at $2.40. Just about that time, STEC decided to form a 'handle' to its 6 week double bottom base. It worked laterally to the end of November in a very tight, narrow range. It was trying our patience, but the action suggested accumulation and consolidation, not selling.

That patience was rewarded in early December when STEC exploded higher out of its base. It ran $2 in three sessions. Then it tested the move, fading back to the 10 day EMA. That move panics out a lot of investors; the stock just broke higher but then turns around and give some of the gain back. Fearing a breakdown they sell out only to see the stock surge. If volume remains low on the test and the pullback is modest and holds near support there is no reason to bail. Sure enough on 12-14-06 STEC surged again, posting a $1.14 gain. That took STEC to our initial target and we sold some of the shares for $10.98, a nice 20% gain. We also sold some of the options for $3.40, a nice 41% gain. Moreover, it looks as if STEC still has more in it on this run. We have some good profit in the bank and can now let the positions run without a lot of anxiety. It always works in an investor's favor to take the emotion out of the equation, and taking some money off the table after good gains is a good way to do that.

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: Reverse head and shoulders. Strong volume Friday as TALX started the breakout move from its 8.5 month pattern that is part of a larger 12 month cup base. This type of accumulation pattern often forms at the bottom of a cup and is what sends a stock higher. Strong run in 2005 and it needed a consolidation. This base has done that and TALX is now ready to make a run. It has plenty of upside room before it hits any resistance. That is always a plus, and catching it right as it breaks higher sets us up for great gains.
Volume: 727.067K Avg Volume: 269.429K
BUY POINT: $27.11 Volume=325K Target=$32.95 Stop=$25.65
POSITION: TUB CE - Mar. $25c (70 delta, 79 OI) &/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.