us stock market, trend trading stock

- Expiration week proves rather uneventful, and even Friday is quiet.
- Economic data gives rally a pause; late rebound brings it back to flat.
- Economic weekly data weaker despite Bernanke's positive tone.
- Expiration week posts a quiet rally. Will the volatility return after the holiday?

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

Chart by StockCharts.com

Company Profile
EARNINGS: 3-11-07
STATUS: Test breakout. ARO announced some strong same store sales results two weeks back. It gapped higher but filled immediately, then continued its move up the 10 day EMA (37.58). This is the second test of the short term moving averages after breaking sharply higher to start 2007, clearing a 3 month flat base that was part of a larger 12 month base. Strong rally is underway, and after this pullback we are looking to move in as ARO drives higher ahead of its earnings release next month.
Volume: 784.3K Avg Volume: 1.355M
BUY POINT: $38.25 Volume=1.8M Target=$45.95 Stop=$36.82
POSITION: ARO GG - July $35c (62 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
We always look for stocks that are leaders in terms of fundamentals growth rates and technical pattern. That combination often results in great moves. TALX was such a stock, and in January 2007 it was setting up for a new break higher. We bought into it as it moved in a tight lateral range along the 18 day EMA. It exploded higher on earnings and we banked a nice fat gain. Then it started working laterally again, setting up exactly as it did in January. We put it on the report on 2-5-07, ready to move in when the 10 day EMA caught up with the stock's gain; that typically sends a breakout higher. We had also picked up a rumor that TALX might be bought out; with the current M&A activity in the market, this just added some icing to the play.

Sure enough, on 2-8-07 it broke higher after a solid volume showing the prior session. We issued the buy alert and entered the play with some stock positions at $32.58 and some July $30 strike call options at $4.60. A nice 65 delta was going to give us some good movement in the option price on the move we anticipated out of this flat consolidation. Those moves can be explosive.

As it turns out TALX drifted a bit higher then tested the move, coming back to the 10 day EMA and the top of the consolidation. The next session EFX announced it was buying TALX. TALX gapped higher on the news. We could have sold immediately, but we liked what we saw with the buy versus sell pressure and decided to see if it would continue higher. Starting early afternoon TALX exploded higher, surging up to $36.94. We were watching, and when it peaked out we sold our stock at $34.90 (13.2% gain) and our options for $7.30 (58.7%, $270/contract). We decided to sell them all out on this move given it is a takeover story tied in part to EFX' price. Sometimes rumors pay off, but the key to this play was its solid fundamental and technical pattern; the buyout just accelerated the move. No complaints about that.

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