us stock market, trend trading stock

- Jobs report continues the rally . . . for the morning.
- Upward revisions keep the jobs report in decent shape.
- Who, or more precisely what, benefits from higher taxes.
- Still some great looking upside plays, but the market looks heavy heading into next week.

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

Chart by StockCharts.com

Company Profile
Even when the market is correcting you can find upside gains if you know what to look for. The current correction is driven by a jump in fear that the economy is going to be weaker than expected what with the low end mortgage issues. When the market turns a bit defensive money tends to flow to certain areas deemed 'safe' by big money managers. Energy is one of those areas, and combined with the spike in oil prices back above $60/bbl, that makes it an even more compelling place to look for opportunity.

That is one of the places where you look but then you have to know what to look for. We prefer stocks that continue to show strength among the strong, i.e. not giving up ground in the correction and continuing to move on good price/volume action. WNR fit that description as it worked in an 11 week cup with handle base even as the market struggled. We put it on the report in the third week of February, and it broke higher on 2-22-07, clearing its 'handle' on strong, above average volume, the first above average trade in a month. That showed plenty of buying demand as it blew past resistance. We bought some stock for $28.25 and some June $25 strike call options at $4.70. Then we sat back and let WNR go to work for us.

It gapped higher the next session but gave the move back. The next session it was back up again, adding $0.89. It then bounced up and down in a rather volatile move, but trending higher. It added roughly $5 over the next 9 sessions with a $3 spurt to the intraday high on 3-7-07. After just over a week and one-half of upside, such a big move typically represents the climax of that initial run before a test is needed to consolidate for the next move. When we saw it start fading from the high we sold some stock for $32.70, banking a 15.75% gain. We also sold some options that were now bidding $8.20. That banked us a 74% gain or $350/contract. Over the next two sessions WNR faded back modestly, but will shortly be ready to continue higher. Even in a correction money was moving into certain stocks, and if you know how to bird dog them you can take part in those moves.

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. After the nice surge Tuesday on strong volume CXW ended the week at the 18 day EMA (51.66), holding the move and setting up for another run higher. Just have to wait for it to show the move. A good stock for this kind of market because it is not tied to any of the big economic sectors. Also like how it filled the early February bap and jumped right back up. To recap: CXW gapped out of a 4 month base in early February. It had a hard time extending the move, working laterally below 54 to end the month and then faded to fill the gap. It sold with the market, but volume was very light; no dumping the stock, just filling the gap. It held the 50 day EMA (49.96) and then jumped higher last Tuesday on the strongest trade in a month. Pausing now before it continues higher. Looking to move in as it continues higher.
Volume: 412K Avg Volume: 371.018K
BUY POINT: $52.21 Volume=450K Target=$58.89 Stop=$49.89
POSITION: CXW FJ - June $50c (65 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.